Results Showcase 21% Growth in Digital Revenue,
a 32% Narrowing of Net Loss and 86% Improvement in Adjusted
EBITDA
Signs Definitive Agreement with Bridge Media
Networks, Strengthening Balance Sheet and Greatly Expanding Video,
OTT, and CTV Initiatives
The Arena Group Holdings, Inc. (NYSE American: AREN) (“we,”
“us,” “our,” the “Company” or “The Arena Group”), a technology
platform and media company home to more than 320 brands, including
Sports Illustrated, TheStreet, Parade Media (“Parade”), Men’s
Journal, and HubPages, today announced financial results for the
three and nine months ended September 30, 2023 (“Q3 2023”). The
Company once again generated year-over-year revenue growth (up
11%), expanded its gross margins (up approximately 1.5 percentage
points), lowered operating expenses (down 4%), and improved
profitability metrics (net loss narrowed by $5.3 million or 32%,
adjusted EBITDA improved by $2.9 million or 86%) compared to the
three months ended September 30, 2022 (“Q3 2022”).
Additionally, subsequent to the end of the third quarter, on
November 6, 2023, The Arena Group announced that it signed a
definitive agreement to combine with Bridge Media Networks (the
“Proposed Transaction”). The Proposed Transaction is expected to
expand The Arena Group’s video capabilities in digital streaming,
OTT, OTA, CTV, and Free Ad Support Television (“FAST”) channels and
expand the Company’s content in the travel and automotive
categories. In connection with the business combination, 5-Hour
International Corporation Pte. Ltd. (“5-Hour”) will purchase $25
million of common stock of the combined company and The Hans
Foundation, USA (“Hans Foundation”) will purchase $25 million of
preferred stock of the combined company. The parent company of
Bridge Media, Simplify Inventions, LLC (“Simplify”), has also
agreed to purchase up to $20 million of additional common equity in
the combined company for a period of one year following the closing
date of the business combination to be used for operations and
growth. The combined company will receive a five-year guaranteed
advertising commitment of approximately $60 million aggregate value
from a group of consumer brands also owned by Simplify, including
5-hour ENERGY™. The Arena Group intends to use a portion of the
cash proceeds to reduce its debt by $26 million from current
levels. The Proposed Transaction is expected to close in the fourth
quarter of 2023 or first quarter of 2024 subject to the approval of
the Company’s stockholders, the receipt of any required regulatory
approvals, and certain other closing conditions.
Third Quarter 2023 Financial and Operational
Highlights
- Revenue increased 11% to $63.4 million compared to $57.3
million in the prior year quarter.
- Total digital revenue increased nearly 21% to $45.8 million,
representing 72% of total revenue (up from 66% of total revenue in
Q3 2022). Digital advertising revenue increased by nearly 29% to
$36.7 million due to a 46% rise in revenue-per-pageview which more
than offset an 8% overall decline in traffic.
- Digital subscription revenue was $3.2 million, down 31% as
compared to $4.6 million in the prior year quarter, as the Company
continues to focus on free, ad or partner-supported content.
- Licensing and syndication revenue was $4.5 million, an increase
of 2% as compared to the prior year quarter.
- Total print revenue decreased 9% to $17.6 million as compared
to the prior year quarter, in line with historical print
advertising trends.
- Gross profit increased by nearly 15% to $28.2 million,
representing a gross margin improvement of approximately 1.5% to
44%, reflecting the Company’s tight focus on cost control while
growing revenue.
- Total operating expenses decreased by $1.4 million or 4% to
$35.0 million.
- Net loss narrowed by $5.3 million, or 32%, to $11.2 million
from $16.5 million in the prior year period.
- Q3 2023 included approximately $12.4 million in non-cash
charges, including stock-based compensation, amortization of
platform development and intangible assets, and other non-cash
charges.
- Adjusted EBITDA* improved from $3.4 million in Q3 2022 to $6.4
million in Q3 2023, an improvement of $2.9 million or 86%.
*Adjusted EBITDA is a non-GAAP measure. For additional
information regarding non-GAAP financial measures, see “Use of
Non-GAAP Financial Measures” and “Net Loss to Adjusted EBITDA
Reconciliation” below.
Management Commentary
Chairman and Chief Executive Officer of The Arena Group, Ross
Levinsohn, said, “Our third quarter results reflect strong and
focused execution amidst a continued challenging environment. We
grew revenue by 11%, expanded our gross margins, reduced operating
expenses, narrowed net loss by $5.3 million or 32%, and improved
adjusted EBITDA by $2.9 million or 86%. This progress, despite
industry-wide headwinds in the advertising ecosystem and shifting
audiences, demonstrates the earnings power of our differentiated
business model, enabling us to grow more efficiently and drive
engagement.”
“Additionally, our agreement with Bridge Media Networks
continues to advance, and we have completed due diligence and last
week signed a binding and definitive agreement,” continued Mr.
Levinsohn. “This proposed combination is expected to significantly
accelerate our video opportunities across all digital and
terrestrial platforms, a key component of our strategy. We expect
the combination will expand our content base into two new
verticals, travel and automotive, bolstering our business model. We
have targeted these two topics for verticals for some time, and
this acquisition will provide the brand assets to accelerate the
launch.”
“Finally, this transformative transaction is expected to
significantly bolster our balance sheet, reduce our debt, and
provide meaningful growth capital,” concluded Mr. Levinsohn.
“Combined with access to additional capital as part of this
agreement, and the inclusion of a significant advertising
commitment, we expect this transaction will push our business
forward.”
Highlights across the Company’s verticals include:
- The Sports vertical, anchored by Sports Illustrated, for the
first time reached the #2 spot in the Comscore sports properties
rankings this quarter, a milestone achievement for the brand.
Athlon Sports and team sites brand FanNation both delivered strong
traffic growth, with pageviews increasing by 116% and 48%
respectively as compared to the prior year quarter, according to
Google Analytics. Sports Illustrated is resonating with audiences
on social media as well, with over 600,000 new followers during the
quarter.
- The Finance vertical, anchored by TheStreet, had a record
quarter with nearly 40 million monthly average pageviews according
to Google Analytics, an increase of 40% as compared to the prior
year quarter. TheStreet continues to distribute original video
content from the floor of the New York Stock Exchange across
multiple channels, syndication platforms, and platforms.
- The Lifestyle vertical, anchored by Parade and Men’s Journal,
added new publishing partners during the quarter, with Parade
partnering with National Day Calendar on daily themed content, and
new partnerships with Men’s Journal ranging in topics from
Mountaineering to Cycling to Adventure Travel.
- In September, the Company launched its Creator Network, a
creator-led cultural content hub, backed by its iconic brands for
social branded opportunities. The Company has engaged with several
new advertiser/creator partnerships, one of which resulted in
Sports Illustrated’s highest-viewed original content series ever,
with 40 million views across Instagram and TikTok.
Financial Results for the Three Months Ended September 30,
2023 Compared to the Three Months Ended September 30, 2022
Revenue
Revenue was $63.4 million in Q3 2023, representing an increase
of 11% compared to $57.3 million in Q3 2022.
Digital Revenue
Revenue from digital operations grew approximately 21%
year-over-year to $45.8 million in Q3 2023, with a 29% increase in
digital advertising offsetting a 31% decrease in digital
subscriptions. Revenue per pageview increased 46%, while traffic
declined 8%.
Print Revenue
Total print revenue decreased 9% to $17.6 million in Q3 2023
from $19.3 million in Q3 2022, in line with historical print
advertising trends.
Gross Profit
Gross profit for Q3 2023 increased by nearly 15% to $28.2
million representing a gross margin of 44%, compared to a gross
profit of $24.6 million, or gross margin of 43%, in Q3 2022,
reflecting a tight focus on cost control and revenue growth.
Operating Expenses
Total operating expenses declined $1.4 million or 4% to $35.0
million in Q3 2023 from $36.4 million in Q2 2022. The company
continues to maintain expense discipline while optimizing
operations and integrating acquired properties.
Net Loss
Net loss was $11.2 million in Q3 2023 as compared to $16.5
million in the prior year period, a $5.3 million or 32%
improvement, primarily as a result of a $4.9 million narrowing in
loss from operations that was partially offset by a $0.9 million
increase in interest expense related to increased debt outstanding.
Q3 2023 included non-cash charges of $12.4 million, consistent with
the charges in the prior year period.
Adjusted EBITDA
Adjusted EBITDA was $6.4 million, a positive swing of $2.9
million or 86% compared to $3.4 million for Q3 2022. Adjusted
EBITDA is a non-GAAP financial measure. A disclaimer and
reconciliation are provided below.
Balance Sheet and Liquidity as of September 30, 2023
Cash and cash equivalents were $7.3 million as of September 30,
2023, compared to $13.9 million as of December 31, 2022.
In the first nine months of 2023, net cash used in operating
activities was $22.3 million, as compared to $14.7 million used in
operating activities in the first nine months of 2022.
Conference Call
Ross Levinsohn, The Arena Group’s Chief Executive Officer, Doug
Smith, Chief Financial Officer, and Andrew Kraft, Chief Operating
Officer, will host a conference call and live webcast to review the
quarterly results and provide a corporate update at 4:30 p.m. ET
today.
To access the call, interested parties should use one of the
below links:
- Webcast link for interested listeners:
https://edge.media-server.com/mmc/p/feqbkch6
- Dial-in registration participant call link:
https://tinyurl.com/Arenq3
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.
About The Arena Group
The Arena Group (NYSE American: AREN) is an innovative
technology platform and media company with a proven cutting-edge
playbook that transforms media brands. Our unified technology
platform empowers creators and publishers with tools to publish and
monetize their content, while also leveraging quality journalism of
anchor brands like Sports Illustrated, TheStreet, Parade, Men’s
Journal, and HubPages to build their businesses. The company
aggregates content across a diverse portfolio of over 320 brands,
reaching over 100 million users monthly. Visit us at
thearenagroup.net and discover how we are revolutionizing the world
of digital media.
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 our
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,
as adjusted for loss from discontinued operations, with additional
adjustments for (i) interest expense (net), (ii) provision for or
benefit from income taxes, (iii) depreciation and amortization,
(iv) stock-based compensation, (v) change in fair value of
contingent consideration, (vi) liquidated damages, (vii) loss on
impairment of assets, (viii) employee retention credit, and (ix)
employee restructuring payments.
Our Adjusted EBITDA measure 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 Adjusted EBITDA as
superior to, or a substitute for, the equivalent measures
calculated and presented in accordance with GAAP. A reconciliation
of Adjusted EBITDA to net loss has been provided in the financial
statement tables included in this press release, and investors are
encouraged to review the reconciliation.
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
proposed strategic transaction with Simplify Inventions, including
the Company’s ability to complete the transaction and the potential
benefits thereof, the Company’s anticipated restructuring of its
indebtedness, the Company’s anticipated future expenses and
investments, business strategy and plans, expectations relating to
its industry, market conditions and market trends and growth,
market position and potential market opportunities, and objectives
for future operations. 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 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 remaining effects of the
COVID-19 pandemic and impact on the demand for the Company
products; 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 Company in its
public filings with the SEC, including its Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q. Important factors that
could cause actual results relating to the pending transaction with
Bridge Media Networks to differ materially from such plans,
estimates or expectations include, among others: (1) that one or
more closing conditions to the transactions, including certain
regulatory approvals, may not be satisfied or waived, on a timely
basis or otherwise, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of
the proposed transactions, may require conditions, limitations or
restrictions in connection with such approvals or that the required
approval by the stockholders of The Arena Group may not be
obtained; (2) the risk that the proposed transactions may not be
completed in the time frame expected by the parties, or at all; (3)
unexpected costs, charges or expenses resulting from the proposed
transactions; (4) uncertainty of the expected financial performance
of the combined company following completion of the proposed
transactions; (5) failure to realize the anticipated benefits of
the proposed transactions, including as a result of delay in
completing the proposed transactions or integrating Bridge Media
Networks and The Arena Group; (6) the ability of the combined
company to implement its business strategy; (7) difficulties and
delays in achieving revenue and cost synergies of the combined
company; (8) any inability to retain and hire key personnel; (9)
the occurrence of any event that could give rise to termination of
the proposed transactions; (10) potential litigation in connection
with the proposed transactions or other settlements or
investigations that may affect the timing or occurrence of the
proposed transactions or result in significant costs of defense,
indemnification and liability; (11) evolving legal, regulatory and
tax regimes; (12) changes in economic, financial, political and
regulatory conditions, in the United States and elsewhere, and
other factors that contribute to uncertainty and volatility,
including natural and man-made disasters, civil unrest, pandemics,
geopolitical uncertainty and conditions that may result from
legislative, regulatory, trade and policy changes associated with
the current or subsequent U.S. administration; (13) the ability of
Bridge Media Networks, The Arena Group and the combined company to
successfully recover from a disaster or other business continuity
problem due to a hurricane, flood, earthquake, terrorist attack,
war, pandemic, security breach, cyber-attack, power loss,
telecommunications failure or other natural or man-made event; (14)
the impact of public health crises, such as pandemics and epidemics
and any related company or governmental policies and actions to
protect the health and safety of individuals or governmental
policies or actions to maintain the functioning of national or
global economies and markets; (15) actions by third parties,
including government agencies; (16) potential adverse reactions or
changes to business relationships resulting from the announcement
or completion of the transactions; (17) the risk that disruptions
from the proposed transactions will harm Bridge Media Networks and
The Arena Group, including current plans and operations; (18)
certain restrictions during the pendency of the acquisition that
may impact Bridge Media Networks’ or The Arena Group’s ability to
pursue certain business opportunities or strategic transactions;
(19) Bridge Media Networks’, The Arena Group’s and the combined
company’s ability to meet expectations regarding the accounting and
tax treatments of the proposed transactions; (20) delays in Bridge
Media Networks attracting advertisers or executing its business
growth strategy; (21) continued fragmentation of audiences and a
reduction in the number of television subscribers; (22) decreases
in advertising spending or advertising demand or the demand for
Bridge Media Networks programming; (23) increased competition for
programing, audiences and advertisers; (24) loss of Bridge Media
Networks’ key affiliate customer, Agency 5; (25) changes in
government regulations, licensing requirements, or FCC’s rules and
regulations and the applicability of such rules and regulations to
Bridge Media Networks; (26) failure to identify strategic
acquisitions candidates or achieve the desired results of strategic
acquisitions; (27) loss of material intellectual property rights of
Bridge Media’s programming, technology, digital and other content;
(28) labor disputes, increasing demand for creative talent and
union activity; (29) loss of key employees or the inability to
attract and retain skilled employees; (30) inability to or
limitations on raising additional capital in the future. The
foregoing list of factors is not exhaustive and (31) and those
factors detailed by the Company in its public filings with the SEC,
including its Annual Reports 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
SEC, 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.
No Offer or Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval with respect to the proposed transaction with
Bridge Media Networks (the “Proposed Transaction”) or
otherwise.
Additional Information and Where to Find It
In connection with the Proposed Transaction, the Company intends
to file relevant materials with the SEC, including a preliminary
and definitive proxy statement to be filed by the Company. The
definitive proxy statement and proxy card will be delivered to the
stockholders of the Company in advance of the special meeting
relating to the Proposed Transaction. THE COMPANY’S STOCKHOLDERS
ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT IN ITS ENTIRETY
WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED BY THE
COMPANY WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR
INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE
PARTIES TO THE PROPOSED TRANSACTION. Investors and security holders
will be able to obtain a free copy of the proxy statement and such
other documents containing important information about the Company,
once such documents are filed with the SEC, through the website
maintained by the SEC at www.sec.gov. The Company makes available
free of charge at the Company’s website copies of materials it
files with, or furnishes to, the SEC. The contents of the websites
referenced above are not deemed to be incorporated by reference
into the proxy statement.
Participants in the Solicitation
This document does not constitute a solicitation of proxy, an
offer to purchase or a solicitation of an offer to sell any
securities. The Company and its directors, executive officers and
certain employees may be deemed to be participants in the
solicitation of proxies from the stockholders of the Company in
connection with the Proposed Transaction. Information regarding the
special interests of these directors and executive officers in the
Proposed Transaction will be included in the definitive proxy
statement referred to above. Security holders may obtain
information regarding the names, affiliations and interests of the
Company’s directors and executive officers in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2022 and
its definitive proxy statement for the 2023 annual meeting of
stockholders. Additional information regarding the interests of
such individuals in the Proposed Transaction will be included in
the definitive proxy statement relating to the Proposed Transaction
when it is filed with the SEC. These documents (when available) may
be obtained free of charge from the SEC’s website at www.sec.gov
and the Company’s website. The contents of the websites referenced
above are not deemed to be incorporated by reference into the proxy
statement.
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
September 30, 2023
(unaudited)
December 31, 2022
($ in thousands, except share
data)
Assets
Current assets:
Cash and cash equivalents
$
7,290
$
13,871
Restricted cash
-
502
Accounts receivable, net
37,977
33,950
Subscription acquisition costs, current
portion
31,944
25,931
Prepayments and other current assets
6,906
4,441
Total current assets
84,117
78,695
Property and equipment, net
404
735
Operating lease right-of-use assets
229
372
Platform development, net
9,265
10,330
Subscription acquisition costs, net of
current portion
9,751
14,133
Acquired and other intangible assets,
net
44,211
58,970
Other long-term assets
1,041
1,140
Goodwill
42,575
39,344
Total assets
$
191,593
$
203,719
Liabilities, mezzanine equity and
stockholders’ deficiency
Current liabilities:
Accounts payable
$
11,333
$
12,863
Accrued expenses and other
25,765
23,102
Line of credit
17,303
14,092
Unearned revenue
63,757
58,703
Subscription refund liability
750
845
Operating lease liability
471
427
Contingent consideration
1,030
-
Liquidated damages payable
6,293
5,843
Bridge notes
5,767
34,805
Term debt
19,980
65,684
Total current liabilities
152,449
216,364
Unearned revenue, net of current
portion
14,532
19,701
Operating lease liability, net of current
portion
-
358
Liquidated damages payable, net of current
portion
-
494
Other long-term liabilities
758
5,307
Deferred tax liabilities
574
465
Term debt
82,362
-
Total liabilities
250,675
242,689
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; Series G shares issued and outstanding: 168; common shares
issuable upon conversion: 8,582 at September 30, 2023 and December
31, 2022
168
168
Series H convertible preferred stock,
$0.01 par value, $1,000 per share liquidation value and 23,000
shares designated; aggregate liquidation value: $0 and $14,356;
Series H shares issued and outstanding: none and 14,356; common
shares issuable upon conversion: none and 1,981,128 at September
30, 2023 and December 31, 2022, respectively
-
13,008
Total mezzanine equity
168
13,176
Stockholders' deficiency:
Common stock, $0.01 par value, authorized
1,000,000,000 shares; issued and outstanding: 23,823,476 and
18,303,193 shares at September 30, 2023 and December 31, 2022,
respectively
237
182
Common stock to be issued
-
-
Additional paid-in capital
313,611
270,743
Accumulated deficit
(373,098)
(323,071)
Total stockholders’ deficiency
(59,250)
(52,146)
Total liabilities, mezzanine equity and
stockholders’ deficiency
$
191,593
$
203,719
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
($ in thousands, except share
data)
Revenue
$
63,418
$
57,277
$
173,604
$
159,272
Cost of revenue (includes amortization of
platform development and developed technology for three months
ended 2023 and 2022 of $2,191 and $2,413, respectively and for the
nine months ended 2023 and 2022 of $6,883 and $7,099,
respectively)
35,245
32,671
102,422
98,790
Gross profit
28,173
24,606
71,182
60,482
Operating expenses
Selling and marketing
19,271
18,424
56,743
53,123
General and administrative
11,028
13,493
35,803
41,841
Depreciation and amortization
4,726
4,478
14,227
13,124
Loss on impairment of assets
-
-
119
257
Total operating expenses
35,025
36,395
106,892
108,345
Loss from operations
(6,852)
(11,789)
(35,710)
(47,863)
Other (expense) income
Change in fair value of contingent
consideration
(60)
-
(469)
-
Interest expense
(4,042)
(3,184)
(13,225)
(8,510)
Liquidated damages
(151)
(339)
(455)
(639)
Total other expenses
(4,253)
(3,523)
(14,149)
(9,149)
Loss before income taxes
(11,105)
(15,312)
(49,859)
(57,012)
Income tax (provision) benefit
(61)
(547)
(168)
1,180
Loss from continuing operations
(11,166)
(15,859)
(50,027)
(55,832)
Loss from discontinued operations, net of
tax
-
(646)
-
(1,329)
Net loss
$
(11,166)
$
(16,505)
$
(50,027)
$
(57,161)
Basic and diluted net loss per common
share:
Continuing operations
$
(0.48)
$
(0.87)
$
(2.32)
$
(3.22)
Discontinued operations
-
(0.04)
-
(0.08)
Basic and diluted net loss per common
share
$
(0.48)
$
(0.90)
$
(2.33)
$
(3.30)
Weighted average number of common shares
outstanding – basic and diluted
23,445,675
18,284,670
21,567,166
17,339,882
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Nine Months Ended September
30,
2023
2022
($ in thousands)
Cash flows from operating
activities
Net loss
$
(50,027)
$
(57,161)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of property and equipment
276
395
Amortization of platform development and
intangible assets
20,834
19,828
Amortization of debt discounts
2,178
1,215
Noncash and accrued interest
754
86
Loss on impairment of assets
119
466
Change in fair value of contingent
consideration
469
-
Liquidated damages
455
639
Stock-based compensation
16,978
24,777
Deferred income taxes
109
(1,235)
Bad debt expense
217
609
Other
-
184
Change in operating assets and liabilities
net of effect of business combination:
Accounts receivable, net
(4,213)
(1,710)
Subscription acquisition costs
(1,631)
8,100
Royalty fees
-
11,250
Prepayments and other current assets
(2,465)
2,107
Other long-term assets
(62)
75
Accounts payable
(1,719)
(7,652)
Accrued expenses and other
1,670
(3,390)
Unearned revenue
(146)
(7,382)
Subscription refund liability
(95)
(2,250)
Operating lease liabilities
(171)
(162)
Other long-term liabilities
(5,795)
(3,465)
Net cash used in operating activities
(22,265)
(14,676)
Cash flows from investing
activities
Purchases of property and equipment
-
(444)
Capitalized platform development
(2,967)
(3,990)
Proceeds from sale of equity
investment
-
2,450
Payments for acquisition of business, net
of cash acquired
(500)
(10,331)
Net cash used in investing activities
(3,467)
(12,315)
Cash flows from financing
activities
Proceeds (repayments) under line of
credit, net borrowing
3,211
6,486
Proceeds from common stock registered
direct offering
11,500
32,058
Payments of issuance costs from common
stock registered direct offering
(167)
-
Proceeds from common stock public
offering, net of offering costs
-
94
Payments of issuance costs from common
stock public offering
-
(1,568)
Proceeds from bridge notes
5,703
-
Payments of debt issuance costs
(100)
-
Payment of deferred cash payments
(75)
(453)
Payment of taxes from common stock
withheld
(1,423)
(3,520)
Payment of restricted stock
liabilities
-
(2,152)
Net cash provided by financing
activities
18,649
30,945
Net increase (decrease) in cash, cash
equivalents, and restricted cash
(7,083)
3,954
Cash, cash equivalents, and restricted
cash – beginning of period
14,373
9,851
Cash, cash equivalents, and restricted
cash – end of period
$
7,290
$
13,805
Cash, cash equivalents, and restricted
cash
Cash and cash equivalents
$
7,290
$
13,303
Restricted cash
-
502
Total cash, cash equivalents, and
restricted cash
$
7,290
$
13,805
Supplemental disclosure of cash flow
information
Cash paid for interest
$
10,835
$
7,209
Cash paid for income taxes
85
-
Noncash investing and financing
activities
Reclassification of stock-based
compensation to platform development
$
785
$
1,529
Issuance cost of offerings recorded in
accrued expenses and other
189
-
Issuance of common stock in connection
with settlement of liquidated damages
499
7,008
Issuance of common stock upon conversion
of Series H convertible preferred stock
13,008
511
Issuance of common stock in connection
with acquisitions
2,000
3,141
Deferred cash payments recorded in
connection with acquisitions
246
949
Assumptions of liabilities in connection
with acquisitions
1,246
11,602
Reclassification to liability upon common
stock modification
68
-
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
NET LOSS TO ADJUSTED EBITDA
RECONCILIATION
(unaudited)
The following table presents a
reconciliation of Adjusted EBITDA to net loss, which is the most
directly comparable GAAP measure, for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net loss
$
(11,166)
$
(16,505)
$
(50,027)
$
(57,161)
Net loss from discontinued operations
-
646
-
1,329
Net loss from continued operations
(11,166)
(15,859)
(50,027)
(55,832)
Add (deduct):
Interest expense, net (1)
4,042
3,184
13,225
8,510
Income tax provision (benefit)
61
547
168
(1,180)
Depreciation and amortization (2)
6,917
6,891
21,110
20,223
Stock-based compensation (3)
4,362
8,311
16,978
24,777
Change in fair value of contingent
consideration (4)
60
-
469
-
Liquidated damages (5)
151
339
455
639
Loss on impairment of assets (6)
-
-
119
257
Employee retention credit (7)
-
-
(6,868)
-
Employee restructuring payments (8)
735
-
4,997
679
Professional and vendor fees (9)
1,194
-
1,194
-
Adjusted EBITDA
$
6,356
$
3,413
$
1,820
$
(1,927)
- Interest expense is related to our capital structure and varies
over time due to a variety of financing transactions. Interest
expense includes $533 and $280 for amortization of debt discounts
for the three months ended September 30, 2023 and 2022,
respectively, as presented in our condensed consolidated statements
of cash flows, which is a noncash item. Interest expense includes
$2,178 and $1,215 for amortization of debt discounts for the nine
months ended September 30, 2023 and 2022, respectively. Investors
should note that interest expense will recur in future
periods.
- Depreciation and amortization is related to our developed
technology and Platform included within cost of revenues of $2,191
and $2,413, for the three months ended September 30, 2023 and 2022,
respectively, and depreciation and amortization included within
operating expenses of $4,726 and $4,478 for the three months ended
September 30, 2023 and 2022, respectively. Depreciation and
amortization is related to our developed technology and Platform
included within cost of revenues of $6,883 and $7,099, for the nine
months ended September 30, 2023 and 2022, respectively, and
depreciation and amortization included within operating expenses of
$14,227 and $13,124 for the nine months ended September 30, 2023
and 2022, respectively. We believe (i) the amount of depreciation
and amortization expense in any specific period may not directly
correlate to the underlying performance of our business operations
and (ii) such expenses can vary significantly between periods as a
result of new acquisitions and full amortization of previously
acquired tangible and intangible assets. Investors should note that
the use of tangible and intangible assets contributed to revenue in
the periods presented and will contribute to future revenue
generation and should also note that such expense will recur in
future periods.
- Stock-based compensation represents noncash costs arise from
the grant of stock-based awards to employees, consultants and
directors. We believe that excluding the effect of stock-based
compensation from Adjusted EBITDA assists management and investors
in making period-to-period comparisons in our operating performance
because (i) the amount of such expenses in any specific period may
not directly correlate to the underlying performance of our
business operations, and (ii) such expenses can vary significantly
between periods as a result of the timing of grants of new
stock-based awards, including grants in connection with
acquisitions. Additionally, we believe that excluding stock-based
compensation from Adjusted EBITDA assists management and investors
in making meaningful comparisons between our operating performance
and the operating performance of other companies that may use
different forms of employee compensation or different valuation
methodologies for their stock-based compensation. Investors should
note that stock-based compensation is a key incentive offered to
employees whose efforts contributed to the operating results in the
periods presented and are expected to contribute to operating
results in future periods. Investors should also note that such
expenses will recur in the future.
- Change in fair value of contingent consideration represents the
change in the put option on our common stock in connection with the
Fexy Studios acquisition.
- Liquidated damages (or interest expense related to accrued
liquidated damages) represents amounts we owe to certain of our
investors in private placements offerings conducted in fiscal years
2018 through 2020, pursuant to which we agreed to certain covenants
in the respective securities purchase agreements and registration
rights agreements, including the filing of resale registration
statements and becoming current in our reporting obligations, which
we were not able to timely meet.
- Loss on impairment of assets represents certain assets that are
no longer useful.
- Employee retention credit represents payroll related tax
credits under the Cares Act.
- Employee restructuring payments represents severance payments
to employees under employer restructuring arrangements and payments
to our former Chief Executive Officer for the three and nine months
ended September 30, 2023 and 2022, respectively.
- Represents professional and vendor fees that are nonrecurring
in connection with the Business Combination resulting in a change
of control, including fees incurred by consultants, accountants,
lawyers, and other vendors.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231114162449/en/
Investor Relations Contact Rob Fink FNK IR Aren@fnkir.com
646.809.4048
Media Contacts: Rachael Fink Manager, Public Relations,
The Arena Group Rachael.fink@thearenagroup.net
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