Results Showcase a $28 Million Improvement in
Operating Income for Full Year 2022
The Arena Group Holdings, Inc. (NYSE American: AREN) (the
“Company” or “The Arena Group”), a tech-powered media company home
to more than 265 brands, including Sports Illustrated, TheStreet,
Parade Media (“Parade”), and Men’s Journal operating on a single
technology platform, today announced financial results for the
three months and twelve months ended December 31, 2022. The Company
reported significant improvements in both top- and bottom-line
results in 2022, driving record revenues of more than $221 million,
while reducing operating expenses by nearly $20 million over that
time. In the fourth quarter of 2022, the Company reported revenue
from continuing operations of $61.7 million while reducing
operating expenses by more than 30%. These results were driven by
significant gains in digital advertising and licensing and
syndication, and new lines of revenue in online betting and
ecommerce, while managing headwinds and declines in the legacy
print and subscription lines. Overall, the Company reported its
highest full-year revenue and profits in its history.
(in thousands)
Three Months EndedDecember 31, 2022 versus
2021 Years Ended December 31, 2022 versus 2021
Revenue by Category
2022
2021
$ Change % Change
2022
2021
$ Change % Change Digital Revenue Digital
advertising
$
34,467
$
23,468
$
10,999
46.9
%
$
109,317
$
62,865
$
46,452
73.9
%
Digital subscriptions
4,576
7,155
(2,579
)
-36.0
%
21,156
29,629
(8,473
)
-28.6
%
Licensing and syndication
5,896
2,669
3,227
120.9
%
18,173
8,471
9,702
114.5
%
Other digital revenue
250
11
239
2172.7
%
1,166
43
1,123
2611.6
%
Total digital revenue
45,189
33,303
11,886
35.7
%
149,812
101,008
48,804
48.3
%
Print Revenue Print advertising
2,429
2,147
282
13.1
%
10,214
9,051
1,163
12.8
%
Print subscriptions
14,046
25,754
(11,708
)
-45.5
%
60,909
79,081
(18,172
)
-23.0
%
Total print revenue
16,475
27,901
(11,426
)
-41.0
%
71,123
88,132
(17,009
)
-19.3
%
Total revenue
$
61,664
$
61,204
$
460
0.8
%
$
220,935
$
189,140
$
31,795
16.8
%
*The results for the fourth quarter of 2022 and full year 2022
have been adjusted in this press release to remove the discontinued
operations of the Parade print business (“Parade Print”) that was
acquired on April 1, 2022 and was discontinued on November 13,
2022.
Fourth Quarter 2022 Financial and Operational
Highlights
- Quarterly revenue from continuing operations was $61.7 million
versus $61.2 million in the prior year period.
- Digital advertising revenue increased 47% to a record $34.5
million versus $23.5 million in the prior year period.
- Quarterly operating expenses decreased by $15.3 million from
$50.8 million to $35.6 million in the prior year period.
- Net loss improved by $5.4 million to $13.7 million versus $19.1
million in the prior year period.
- The fourth quarter of 2022 included approximately $15.0 million
in non-cash charges, which represents approximately 109% of the net
loss. The non-cash charges include stock-based compensation,
depreciation, amortization of platform development and intangible
assets and other non-cash charges.
- Adjusted EBITDA** was $5.4 million versus $1.1 million in the
prior year period.
- The Arena Group generated $3.4 million in cash from operations
versus $6.5 million of cash used in operations in the prior year
period.
Full Year 2022 Financial Highlights
- Total revenue from continuing operations for 2022 was $220.9
million, representing an increase of 17% from $189.1 million for
2021. This was accomplished as a result of a 48% year-over-year
increase in revenues from the digital side of our business, which
more than offset the planned reduction in print revenues.
- Digital advertising revenue increased 74% to $109.3 million
from $62.9 million in 2021.
- Operating expenses decreased by $19.0 million from $162.9
million in the prior year to $143.9 million in 2022.
- Loss from continuing operations was $67.4 million in 2022,
representing an improvement of $22.6 million compared to a loss
from continuing operations of $89.9 million in the prior year. Loss
from discontinued operations was $3.5 million for 2022, with no
such loss in 2021.
- Net loss improved by over $19.1 million to $70.9 million in
2022 versus $89.9 million in the prior year. Fiscal year 2022
included $61.6 million in non-cash charges which represents
approximately 87% of the net loss. The non-cash charges include
stock-based compensation, depreciation, amortization of platform
development and intangible assets and other non-cash charges.
- Adjusted EBITDA** was $3.1 million, compared to a $12.1 million
loss in the prior year.
**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, “2022 was a transformative year for our Company as
we grew our digital business lines substantially, expanded our
portfolio, recorded revenue growth and sharpened our operations to
drive significant improvements to our financial results. We have
grown revenue from $53.3 million in 2019 to $220.9 million in 2022,
while expanding margins and significantly narrowing our losses and
reporting our first full year of positive Adjusted EBITDA in our
Company’s history.”
“In 2023, we are focused on continuing to streamline our
operations to drive operating cash flow and profits for our Company
and shareholders,” added Mr. Levinsohn. “We have successfully
re-platformed our Men’s Journal, Men’s Fitness, Surfer, Powder and
Bike acquisitions, and following the addition of 113 new sites in
2022, we continue to further expand our footprint, reach and
inventory. In the fourth quarter of 2022, we generated positive
cash from operations and delivered $5.4 million in positive
Adjusted EBITDA. We expect $30 to $35 million in Adjusted EBITDA
for 2023, demonstrating the growing earnings power of our business
as we more effectively leverage our scale. Simultaneously, we
expect to continue to expand our use of technology, including
artificial intelligence solutions, to drive incremental
productivity efficiencies.”
The Company generated impactful growth across each vertical in
the fourth quarter. Highlights include:
- The Sports vertical, anchored by Sports Illustrated and
featuring local team sites brand FanNation, The Spun and Sports
Illustrated Media Group partners, increased monthly average
pageviews by 76% in 2022 compared to 2021, according to Google
Analytics, and the Sports Illustrated Media Group was the #4 ranked
sports media property according to Comscore in January 2023.
- The Finance vertical grew monthly average pageviews 139% in
2022 compared to 2021, reaching an average of 27 million pageviews
online each month, according to Google Analytics.
- The Lifestyle vertical, anchored by Parade, which the Company
acquired in April, continued to deliver improvements in audience
and yield. According to Google Analytics, Parade.com’s monthly
average pageviews have increased by 44% in 2022 compared to 2021,
reaching 586 million quarterly pageviews in the fourth quarter.
Unique users approximately doubled in the last six months of 2022,
according to Comscore.
- The Company’s pet property, Pet Helpful, delivered a 364%
year-over-year growth in quarterly pageviews in the fourth quarter
of 2022, reaching 309 million in the fourth quarter, according to
Google Analytics.
- In the HubPages business, the Company’s content playbook has
now expanded across 34 sites, with plans to double the number of
sites utilizing the playbook in 2023. As a result of this strategy,
the Company’s total HubPages monthly average pageviews in the
fourth quarter was 65.4 million, up 54% from the prior year,
according to Google Analytics.
Financial Results for the Three Months Ended December 31,
2022 Compared to the Three Months Ended December 31, 2021
Revenue
Revenue from continuing operations was $61.7 million for the
fourth quarter of 2022, representing an increase of 1% compared to
$61.2 million in the fourth quarter of 2021.
Digital Revenue
Revenue from digital operations grew 36% year-over-year to $45.2
million in the fourth quarter 2022, highlighted by a 47% increase
in digital advertising. Consumer engagement, measured by page view
growth, recorded a 22% gain to more than 1.5 billion during the
quarter, and a 13% increase in revenue per page view
year-over-year.
Licensing and syndication revenue increased by $3.2 million, or
121% from the prior year period as we now distribute content to
more than 600 external outlets.
Print Revenue
The improvement in digital revenue offset an $11.4 million
decrease in total print revenue, from $27.9 million in the fourth
quarter of 2021 to $16.5 million in the fourth quarter of 2022,
which was primarily related to a planned decrease in print revenue
from the Sports Illustrated magazine, as we reduced the rate-base
from 1.7 million to 1.2 million. The Company continues to focus on
driving margin and profits from its subscription relationships, as
the segment remains profitable from subscriptions and print
advertising.
Gross Profit
Gross profit for the fourth quarter of 2022 decreased slightly
to $27.5 million from $33.9 million in the prior year period. Cost
of revenue increased by 25% to $34.1 million in the fourth quarter
of 2022 from $27.3 million in the prior year period, primarily
driven by higher print production and distribution costs.
Operating Expenses
Total operating expenses decreased by $15.3 million to $35.6
million in the fourth quarter of 2022 from $50.8 million in the
prior year period. This decrease was primarily driven by lower
subscription acquisition costs related to the aforementioned 29%
decrease in the Sports Illustrated rate base. In addition, the
Company continues to optimize operations, integrate acquired
properties and drive efficiency.
Net Loss from Continuing
Operations
Net loss from continuing operations improved to $11.6 million in
the fourth quarter of 2022 as compared to $19.1 million in the
prior year period. The fourth quarter of 2022 included non-cash
charges of $15.0 million as compared to $19.5 million of non-cash
charges in the prior year period.
Adjusted EBITDA
Adjusted EBITDA was $5.4 million for the fourth quarter of 2022,
an improvement from $4.3 million in the prior year period.
Financial Results for the 12 Months Ended December 31, 2022
Compared to the 12 Months Ended December 31, 2021
Revenue:
Total revenue from continuing operations for the full year 2022
was $220.9 million as compared to $189.1 million in the prior year,
which represents an increase of 17%.
Digital Revenue
Our digital advertising revenue from continuing operations
increased by $46.5 million or 74%, driven by a 47% increase in
monthly average pageviews and a 13% increase in RPM for the full
year 2022 as compared to the prior year with 80% of the total
digital revenue increase attributable to organic growth.
For the full year 2022, licensing and syndication revenue
increased by $9.7 million or 115% from the prior year as we added
500 new digital outlets during the year and expanded existing ones
to leverage our content with increased monetization. Other digital
revenue, primarily consisting of e-commerce and sponsorship
revenue, increased by $1.1 million from the prior year largely
attributable to the expansion of our e-commerce business.
Print Revenue
Print subscription revenue decreased by $18.2 million or 23%
from the prior year, which was principally related to our planned
rate base reduction for our Sports Illustrated media business of
29% from 1.7 million in fiscal 2021 to 1.2 million in fiscal 2022
to focus on more profitable subscriptions.
Gross Profit
Gross profit was $88.0 million, representing a 40% gross margin,
for the full year 2022, as compared to $78.6 million, representing
a 42% gross margin in the prior year. Operating expenses decreased
by $19.0 million from $162.9 million in the prior year to $143.9
million for the full year 2022.
Net Loss from Continuing
Operations
Net loss from continuing operations was $67.4 million for the
full year 2022, an improvement of $22.6 million compared to $89.9
million in the prior year. The Company recorded $61.6 million of
non-cash charges in 2022, representing 91% of the net loss in 2022.
During fiscal 2021, the Company recorded $69.4 million of non-cash
charges.
Adjusted EBITDA
Adjusted EBITDA was $3.1 million for the full year 2022
representing an improvement of more than $15 million, compared to a
loss of $12.1 million for the prior year, primarily attributable to
the $22.6 million improvement in net loss from continuing
operations.
Balance Sheet and Liquidity as of December 31, 2022
Cash and cash equivalents were $13.9 million as of December 31,
2022, compared to $9.3 million as of December 31, 2021.
For the year ended December 31, 2022, net cash used in operating
activities was $11.3 million, as compared to $14.7 million for the
prior year, a $3.4 million improvement. The improvement was
primarily a result of the increase in revenue and reduction in
operating expenses as well as a general improvement in our working
capital efficiency.
Fiscal 2023 Outlook
Management reiterated its full-year 2023 guidance of between
$255 million and $270 million in total revenue and between $30
million and $35 million in Adjusted EBITDA.
“As we do each quarter and on an annual basis, we proactively
manage our cost structure and focus on driving increased
operational efficiency to position the Company to achieve its
Adjusted EBITDA target,” commented Doug Smith, The Arena Group’s
Chief Financial Officer.
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
financial results and provide a corporate update on Thursday, March
16, 2023 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 403807. 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 16,
2023 until 11:59 p.m. ET on March 30, 2023 by dialing 877-481-4010
(United States) or 919-882-2331 (international) and using the
passcode 47566.
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, TheStreet, Parade, and Men's Journal 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 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,
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)
gain upon debt extinguishment, (viii) loss on impairment of lease,
(ix) loss on lease termination, (x) loss on impairment of assets,
(xi) professional and vendor fees, and (xii) 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.
We have not reconciled full year 2023 guidance for Adjusted
EBITDA to the most directly comparable GAAP measure because certain
items that impact Adjusted EBITDA are uncertain, out of our
control, and/or cannot be reasonably predicted. Accordingly, a
reconciliation of Adjusted EBITDA guidance to the corresponding
GAAP measure is not available without unreasonable effort.
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 full year
2023 guidance for Adjusted EBITDA, 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 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
Company in its public filings with the Securities and Exchange
Commission (the “SEC”), 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 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.
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited)
As of December 31,
2022
2021
($ in thousands, except share
data)
Assets
Current assets:
Cash and cash equivalents
$
13,871
$
9,349
Restricted cash
502
502
Accounts receivable, net
33,950
21,660
Subscription acquisition costs, current
portion
25,931
30,162
Royalty fees
-
11,250
Prepayments and other current assets
4,441
4,748
Total current assets
78,695
77,671
Property and equipment, net
735
636
Operating lease right-of-use assets
372
528
Platform development, net
10,330
9,299
Subscription acquisition costs, net of
current portion
14,133
8,235
Acquired and other intangible assets,
net
58,970
57,356
Other long-term assets
1,140
639
Goodwill
39,344
19,619
Total assets
$
203,719
$
173,983
Liabilities, mezzanine equity and
stockholders’ deficiency
Current liabilities:
Accounts payable
$
12,863
$
11,982
Accrued expenses and other
23,102
24,011
Line of credit
14,092
11,988
Unearned revenue
58,703
54,030
Subscription refund liability
845
3,087
Operating lease liabilities
427
374
Liquidated damages payable
5,843
5,197
Bridge notes
34,805
-
Current portion of long-term debt
65,684
5,744
Total current liabilities
216,364
116,413
Unearned revenue, net of current
portion
19,701
15,277
Operating lease liabilities, net of
current portion
358
785
Liquidating damages payable, net of
current portion
494
7,008
Other long-term liabilities
5,307
7,556
Deferred tax liabilities
465
362
Long-term debt, net of current portion
-
64,373
Total liabilities
242,689
211,774
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 December 31, 2022 and 2021
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: $14,356 and
$15,066; Series H shares issued and outstanding: 14,356 and 15,066;
common shares issuable upon conversion: 1,981,128 and 2,075,200 at
December 31, 2022 and 2021, respectively
13,008
13,718
Total mezzanine equity
13,176
13,886
Stockholders' deficiency:
Common stock, $0.01 par value, authorized
1,000,000,000 shares: issued and outstanding; 18,303,193 and
12,635,951 shares December 31, 2022 and 2021, respectively
182
126
Common stock to be issued
-
-
Additional paid-in capital
270,743
200,410
Accumulated deficit
(323,071
)
(252,213
)
Total stockholders’ deficiency
(52,146
)
(51,677
)
Total liabilities, mezzanine equity and
stockholders’ deficiency
$
203,719
$
173,983
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three Months Ended
December 31,
Years Ended December
31,
2022
2021
2022
2021
($ in thousands)
Revenue
$
61,664
$
61,204
$
220,935
$
189,140
Cost of revenue (includes amortization for
developed technology and platform development for 2022 and 2021 of
$9,459 and $8,829, respectively and for the three months ended 2022
and 2021 of 2,360 and $2,263, respectively)
34,134
27,266
132,923
110,530
Gross profit
27,530
33,938
88,012
78,610
Operating expenses
Selling and marketing
19,366
27,697
72,489
81,929
General and administrative
11,658
18,025
53,499
55,612
Depreciation and amortization
4,526
4,363
17,650 16,345
Loss on impairment of assets
-
288
257
1,192
Loss on impairment of lease
-
466
-
466
Loss on termination of lease
-
-
-
7,345
Total operating expenses
35,550
50,839
143,895
162,889
Loss from operations
(8,020
)
(16,901
)
(55,883
)
(84,279
)
Other (expense) income
Change in valuation of warrant derivative
liabilities
-
(463
)
-
34
Interest expense, net
(2,918
)
(2,754
)
(11,428
)
(10,449
)
Liquidated damages
(501
)
(439
)
(1,140
)
(2,637
)
Gain upon debt extinguishment
-
-
- 5,717
Total other expense
(3,419
)
(3,656
)
(12,568
)
(7,335
)
Loss before income taxes
(11,439
)
(20,557
)
(68,451
)
(91,614
)
Income tax benefit (provision)
(117
)
1,444
1,063
1,674
Loss from continuing operations
(11,566
)
(19,113
)
(67,388
)
(89,940
)
Loss from discontinued operations, net of
tax
(2,141
)
-
(3,470
)
-
Net loss
$
(13,697
)
$
(19,113
)
$
(70,858
)
$
(89,940
)
Basic and diluted net loss per common
share:
Continuing operations
$
(0.63
)
$
(1.56
)
$
(3.82
)
$
(7.87
)
Discontinued operations
(0.12
)
-
(0.20
)
-
Basic and diluted net loss per common
stock
$
(0.75
)
$
(1.56
)
$
(4.02
)
$
(7.87
)
Weighted average number of common stock
outstanding – basic and diluted
18,457,296
12,275,151
17,625,619
11,429,740
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Years Ended December
31,
2022
2021
($ in thousands)
Cash flows from operating
activities
Net loss
$
(70,858
)
$
(89,940
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of property and equipment
539
443
Amortization of platform development and
intangible assets
26,570
24,731
Amortization of debt costs
1,581
2,106
Loss on impairment of assets
466
1,192
Loss on impairment of lease
-
466
Loss on termination of lease
-
7,345
Change in valuation of warrant derivative
liabilities
-
(34
)
Liquidated damages
1,140
2,637
Gain upon debt extinguishment
-
(5,717
)
Accrued and noncash converted interest
320
6,956
Stock-based compensation
31,345
30,493
Deferred income taxes
(1,200
)
(1,674
)
Bad debt expense
658
499
Other
184
-
Change in operating assets and liabilities
net of effect of acquisitions:
Accounts receivable
(2,038
)
(3.884
)
Subscription acquisition costs
(1,667
)
3,108
Royalty fees
11,250
15,000
Prepayments and other current assets
2,280
49
Other long-term assets
(285
)
692
Accounts payable
(6,535
)
3,752
Accrued expenses and other
(2,996
)
7,474
Unearned revenue
3,898
(15,819
)
Subscription refund liability
(2,379
)
(949
)
Operating lease liabilities
(218
)
(2,489
)
Other long-term liabilities
(3,359
)
(1,166
)
Net cash used in operating activities
(11,304
)
(14,729
)
Cash flows from investing
activities
Purchases of property and equipment
(530
)
(377
)
Capitalized platform development
(5,179
)
(4,819
)
Proceeds from sale of equity
investment
2,450
-
Payments for acquisitions, net of cash
(35,331
)
(7,950
)
Net cash used in investing activities
(38,590
)
(13,146
)
Cash flows from financing
activities
Proceeds from bridge notes, net of debt
costs
34,728
-
Proceeds from long-term debt
-
5,086
Payments of long-term debt
(5,928
)
-
Proceeds, net of repayments, under line of
credit
2,104
4,809
Proceeds from common stock public
offering, net of offering costs
32,058
-
Payments of issuance costs from common
stock public offering
(1,568
)
-
Proceeds from common stock private
placement
-
20,005
Payments of issuance costs from common
stock private placement
-
(167
)
Proceeds from exercise of common stock
options
95
-
Payment of deferred cash payment
(453
)
-
Payment for taxes related to common stock
withheld for taxes
(4,468
)
(70
)
Payment of restricted stock
liabilities
(2,152
)
(1,472
)
Net cash provided by financing
activities
54,416
28,191
Net increase in cash, cash equivalents,
and restricted cash
4,522
316
Cash, cash equivalents, and restricted
cash – beginning of year
9,851
9,535
Cash, cash equivalents, and restricted
cash – end of year
$
14,373
$
9,851
Cash, cash equivalents, and restricted
cash
Cash and cash equivalents
$
13,871
$
9,349
Restricted cash
502
502
Total cash, cash equivalents, and
restricted cash
$
14,373
$
9,851
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
NET LOSS TO ADJUSTED EBITDA
RECONCILIATION
(unaudited)
Three Months Ended
December 31,
Years Ended December
31,
2022
2021
2022
2021
($ in thousands)
Net loss
$
(13,697
)
$
(19,113
)
$
(70,858
)
$
(89,940
)
Loss from discontinued operations, net of
tax
2,141
-
3,470
-
Loss from continuing operations
(11,556
)
(19,113
)
(67,388
)
(89,940
)
Add (deduct):
Interest expense, net (1)
2,918
2,754
11,428
10,449
Income tax (benefit) provision
117
(1,444
)
(1,063
)
(1,674
)
Depreciation and amortization (2)
6,886
6,626
27,109
25,174
Stock-based compensation (3)
6,568
8,804
31,345
30,493
Change in derivative valuations
-
463
-
(34
)
Liquidated damages (4)
501
439
1,140
2,637
Gain upon debt extinguishment (5)
-
-
-
(5,717
)
Loss on impairment of lease (6)
-
466
-
466
Loss on lease termination (7)
-
-
-
7,345
Loss on impairment of assets (8)
-
288
257
1,192
Professional and vendor fees (9)
-
1,748
-
6,901
Employee restructuring payments (10)
-
65
273
645
Adjusted EBITDA
$
5,434
$
1,096
$
3,101
$
(12,063
)
(1)
Interest expense is related to
our capital structure and varies over time due to a variety of
financing transactions. Interest expense includes $365 and $566 for
amortization of debt discounts for the three months ended December
31, 2022 and 2021, respectively, and $1,581 and $2,106 for
amortization of debt discounts for the years ended December 31,
2022 and 2021, respectively, as presented in our condensed
consolidated and consolidated statements of cash flows, which are a
noncash item. Investors should note that interest expense will
recur in future periods.
(2)
Represents depreciation and
amortization related to our developed technology and Platform
included within cost of revenues of $2,360 and $2,263 for the three
months ended December 31, 2022 and 2021, respectively, and $9,459
and $8,829, for the years ending December 31, 2022 and 2021,
respectively. Depreciation and amortization included within
operating expenses was $4,526 and $4,363 for the three months ended
December 31, 2022 and 2021, respectively, and $17,650 and $16,345
for the years ending December 31, 2022 and 2021, 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.
(3)
Represents noncash costs arising
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.
(4)
Represents damages (or interest
expense related to accrued liquidated damages) 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.
(5)
Represents a gain upon
extinguishment of the Paycheck Protection Program Loan.
(6)
Represents our impairment of
certain leased property that is no longer being used.
(7)
Represents our loss related to
the surrender and termination of our lease of office space located
in New York based on our decision to no longer lease office
space.
(8)
Represents our impairment of
certain assets that are no longer useful.
(9)
Represents one-time,
non-recurring third party professional and vendor fees recorded in
connection with services provided by consultants, accountants,
lawyers, and other vendors (these fees are collectively referred to
as “Professional Fees”) related to (i) the preparation of periodic
reports in order for us to become current on our Securities
Exchange Act of 1934 reporting obligations, (ii) up-list to a
national exchange, (iii) contemplated and completed acquisitions,
(iv) public and private offerings of our securities and other
financings, and (v) stockholder disputes and the implementation of
our rights agreement.
The table below summarizes the costs defined above that we
incurred during fiscal 2022 and 2021:
Three Months Ended
December 31,
Years Ended December
31,
Category
2022
2021
2022
2021
(i) Catch-up periodic reports
$
-
$
301
$
-
$
4,096
(ii) Up-list
-
138
-
231
(iii) M&A
-
695
-
1,034
(iv) Public & private
offerings and other financings
-
56
-
444
(v) Stockholder disputes/Rights
Agreement
-
558
-
1,096
Totals
$
-
$
1,748
$
-
$
6,901
(10)
Represents severance payments to
the former Chief Financial Officer of Parade and our former Chief
Executive Officer for the years ended December 31, 2022 and
2021.
The table below sets forth the loss from discontinued operations
for the period from April 1, 2022 to December 31, 2022:
Three Months Ended December
31, 2022
Year Ended December 31,
2022
($ in thousands)
Revenue
$
6,064
$
26,817
Cost of revenue
6,074
23,015
Gross profit
(10
)
3,802
Operating expense
Selling and marketing
1,893
5,396
General and administrative
238
1,722
Loss on impairment of assets
-
209
Total operating expenses
2,131
7,327
Loss from discontinued operations
(2,141
)
(3,525
)
Income tax benefit
-
55
Net loss from discontinued operations
$
(2,141
)
$
(3,470
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230316005675/en/
Investor Relations Contact Rob Fink FNK IR Aren@fnkir.com
646.809.4048
Media Contacts: Rachael Fink Communications Manager, The
Arena Group Rachael.fink@thearenagroup.net
Andrew Rhodes DKC arena@dkcnews.com
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