The Arena Group Holdings, Inc.

Good day, ladies and gentlemen, and welcome to the Arena Group Holdings fourth quarter full year 2021 earnings call and webcast. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rob Fink of FNKIR. Sir, the floor is yours.

Thank you, Operator. Hosting the call today are Ross Levinson, Chairman and Chief Executive Officer, and Doug Smith, Chief Financial Officer. Andrew Kraft, the company's Chief Operating Officer, is also joining to participate in the Q&A session. Before we begin, I'd like to note that some of the comments made during this presentation and conference call may include forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking. Forward-looking statements relate to future events or future performance and include, without limitation, statements concerning the company's business strategy, future revenues, market growth, capital requirements, product introduction, and expansion plans, and the adequacy of the company's funding. The company cautions investors that any forward-looking statements presented during this conference call are based on beliefs of, assumptions made by, and information currently available to the company. Such statements are based on assumptions, and the actual outcome will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond the company's control or ability to predict. Although the company believes that its assumptions are reasonable, these assumptions are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, the company's actual future results can be expected to differ from its expectations, and those differences may be material. Accordingly, investors should use caution and relying on forward-looking statements, which are based only on known results and trends at the time they are made to anticipate future results or trends. Certain risks are discussed in the company's filings that are with the SEC. With all that said, I'd like to turn the call over to Ross. Ross, congratulations on a great quarter and year. The call is yours.

Thank you, Rob, and welcome, everybody. We're excited to present our first set of earnings today. as a NYSE American listed company. On February 9th, after a tremendous effort by our team, we were able to become a listed company on a national exchange and raise more than $31 million of capital from investors. We are here after a journey of transformation which began in the fall of 2021. Over the past 18 months, We pivoted our strategy, becoming a vibrant publisher of more than 35 owned and operated brands, a partner to over 200 others, a company operating a robust, scalable technology platform, monetization stack, and subscription infrastructure, and a prolific content creator and distributor. In a moment, I'll take you through our journey, but let me highlight some key results first. In 2021 full year, total revenue grew to $189 million versus $128 million in the previous year, a nearly 50% increase. In Q4, digital revenue grew by 50% to $33.3 million. Total revenue in the fourth quarter increased 44% to $61.2 million compared to $42.4 million for the same period in 2020. In 2021, we also improved our gross profit, which more than tripled to 78.2 million or 41% gross profit percentage compared to 25 million or a 19% gross profit percentage in the previous year. While in Q4, our gross profit grew again and increased to 56% from 37% the previous year. We generated positive adjusted EBITDA of 1.1 million during the final quarter of 2021, and we are seeing acceleration in Q1 of 2022. In 2021, we made substantial investments in our technology, our people, and one-time costs associated with our audit and legal expenses in order to bring our filings current and up-list to the NYSE. And those one-time and non-cash items such as stock-based compensation, are reflected in our net loss. The company recorded 68.4 million of non-cash charges in the full year of 2021, representing 76% of the entire net loss of 89.9 million. Our overall audience figures have grown rapidly. According to Comscore, in February of this year, the Arena Group was the 34th largest company in terms of users in the United States. That is up from number 74 just one year ago. Our sports vertical has added over 60 million monthly unique users in one year, while our finance brand, The Street, has nearly quadrupled its monthly unique users in just the last three months. Let me tell you the story of transformation and growth that led to these results. Today we are a modern media company built on proprietary technological infrastructure with rapidly expanding audiences, diversified revenue, and significant data assets, all working together to expand margins and generate profits. In September of 2020, when I took over as CEO, we focused our resources, energy, and strategy on using technology to transform media brands. We invested in technology platforms, the strategic growth of our team, and designed a playbook for success that today is driving phenomenal user and financial growth. We transform companies. We take a brand, whether it's an iconic brand like Sports Illustrated, an early internet pioneer brand like The Street, or a digitally native startup like The Spun, which we bought in June of last year, and we apply our playbook systematically. The results have been spectacular. Unprecedented audience growth, dramatic revenue increases, margin expansion through focused cost management, synergies, and revenue growth and operational excellence. Since pivoting our business in September of 2020, we have applied our strategy and playbook to our core verticals and partners and transformed what was Maven to become the Arena Group. Our blueprint, designed in the fall of 2020 and executed with laser focus, allowed us to change our company and position us for growth. This has all played out over the last 18 months and in Q4 of 2021, our results reflect the groundwork we laid in much of the first three quarters, while the growth we are seeing in Q1 has accelerated thanks to momentum, investments, and execution throughout last year. Our 2021 results demonstrate the validity, efficiency, and replicability of our model as we rapidly grow traffic and with it revenue. In the fall of 2021, we reached the tipping point for our long-range plan. We invested in these areas we needed in order to grow. Our technology is scalable, as is our infrastructure and our headcount. From here forward, we can grow substantially without any major architecture or headcount additions. These investments in hardware, software development, and people have positioned us for margin expansion from here forward. We will not need to spend to grow. In fact, our infrastructure is positioned to ingest partners, new brands, and we are targeting to deliver revenue at gross margins north of 50% going forward. Simply said and to use a football analogy, We needed to build a great offensive line before a great QB or running back would be successful. We've now built that offensive line. But now that we've done that, we are not only protecting our stars, but they are able to run wild and score points. In 2021, you saw us grow rapidly. The increases in audience in the last part of 2021 and early in 2022 foreshadow accelerating revenue growth this year. You also saw us build out and expand our technical platform. We've reached an important inflection point and we will leverage this technology to drive margin expansion and we anticipate moving towards sustainable profitability in 2022. I'm very excited to share these results with you today and show you how 2022 will be even more important for our business and for our shareholders. The past 12 months have truly been a historic time at the Arena Group, and this is a direct result of several strategic shifts that the management team and I made when we were asked to lead the company in September of 2020. The media industry is increasingly challenging for small and large publishers alike, and with the demise of the cookie looming on the digital side and paper and transport costs increasing rapidly on the print side, we had to make a change. We knew that if our company was going to compete in this challenging landscape, we needed to get our technology, our go-to-market approach, and our positioning right. I'm proud to say that we've achieved that this year. We retooled our technology stack, including sunsetting our legacy platforms. We optimized our partnership economics by eliminating partner guarantees, and we shifted our strategic focus to a vertical model. The required investments are behind us, and now we have a scalable, efficient, and proven platform. As we grow by increasing traffic to existing tentpole properties or acquiring new properties to layer onto our platform, we can significantly scale revenue without similar increases in expenses. We have reached the inflection point, and you should see expanding margins in 2022 as we continue to grow. Our unique vertical model starts with a powerful, owned and operated brand with a distinctive voice like Sports Illustrated, The Street, and Parade, which we expect to complete our transaction in the next week or two. We enhance and surround those brands with strategic partners and entrepreneurial publishers who add breath and depth to our content through their specific expertise and audience. whether it be about a specific sports team or a financial product, expanding our content in a way that is both relevant and timely, driving traffic, and increasing advertising inventory. In this vertical partnership model, we share revenue with our partners without incurring costs, keeping our content costs low while showcasing some of the most dynamic and award-winning journalism in the industry from some of the top talents. Our playbook brings audience development tactics to the forefront, SEO tools, social media optimization, and other important aspects to drive traffic both to our anchor, O&O properties, and to the partners and publishers on the domain, creating a mutually beneficial flywheel. It is innovative, and it works. We believe we have the industry's most efficient and robust content model, but since our partners share in revenue and we drive traffic exceptionally well, they do better under our model. And central to this, literally at the center of the flywheel, is the iconic editorial content at the O&O properties. For example, the tremendous growth across our sports vertical would not be possible without the award-winning editorial team at Sports Illustrated. SI continues to represent the pinnacle of sports journalism. Content creation and photojournalism And members of our team are finalists for several awards this year at the Associated Press Sports Editor Awards later this year. I'm very pleased to say that in Q4, we finalized an agreement with the SI Union, which represents part of our talented editorial staff at Sports Illustrated. The Union Memorandum of Agreement provides stability and strong benefits for the membership. Reaching this agreement with the Guild is important to us, And personally, I continue to be honored to work with this iconic brand and this incredible team. With all these investments, while all these investments have necessitated higher fixed costs, the groundwork we've laid is solid and we don't anticipate adding significantly to our fixed cost base in 2022. We began to see positive adjusted EBITDA of 1.1 million and this year we expect to show a positive adjusted EBITDA during 2022. As I said, our business has reached the tipping point, and those investments we made will enable us to convert incremental revenue into margin and profits. Our sports vertical anchored by Sports Illustrated, arguably one of the most storied brands in media, has seen record-setting growth this past year, highlighted in February of this year, when it reached 86 million consumers online according to Comscore and another 9.2 million in print according to MRI Simmons. In June of 2021, we acquired The Spun, a digital and social sports brand that brings what's trending in the sports world to avid and loyal consumers. In the eight months since The Spun joined our platform, their unique users have more than doubled from 21 million in June to over 50 million in February, according to Comscore. After seeing the success with the Spun, we applied our playbook to Sports Illustrated and again saw incremental growth. Sports Illustrated Media Group, a collective of leading online sports brands, including SI, the Spun, Fan Nation, Fadeaway, the Hockey News, and Athlon Sports, was the number four ranked sports site, according to Comscore, in February with over 86 million monthly users. a 25% increase from December's record-breaking 68 million unique users. Additionally, Sports Illustrated now has the number one share of voice on Facebook among sports publishers for link stories according to data from CrowdTangle. This model continues to deliver growth to our partners as well as our O&O properties. We added more than 40 new sites to the Sports Illustrated media group in 2021, one of which, Fadaway World, has seen its monthly unique users increase five-fold since joining our platform in May of 21, according to Comscore. We also continue to diversify our content and product offerings in Sports Illustrated. In September, we launched our gambling efforts along with ABG, the owner of the brand, in partnership with 888 Holdings, a leader in sports betting. The SI Sportsbook launched in one state, Colorado, in conjunction with the start of the NFL season, with plans to expand to several additional markets by the end of 2023. Additionally, in August, we began partnering with iHeartMedia, and our podcasting business has seen significant growth as a result. Shifting gears to our finance vertical, The Street, which has seen many changes over the past year, Jim Cramer, The Street's founder and distinctive voice, departed in October of 2021. Since that time, we have brought on a new leadership team and revamped our content strategy to develop the street's new voice while focusing on retaining subscribers. While we did lose some subscribers, we were able to retain 86% of subscriptions. And more importantly, we have rebuilt the funnel by applying the Arena Group Playbook to the street. At the time of Jim Cramer's departure in October, The site had 5 million monthly unique users according to CompScore. Just four short months later in February, the street had over 16 million unique viewers, more than triple the viewers we had when Jim in his last month was with us. The resulting users, page views, and impressions has grown our advertising business dramatically, and we are optimistic that subscriptions will continue to stabilize and rebound as we continue to develop the street's new voice and reach a wider, more diverse audience. On top of all of this tremendous growth across our platform, we've achieved one of our primary goals heading into 2021, which is to get our filings current with the SEC and uplist to a national stock exchange. On February 9th of 2022, we uplisted our common stock to the NYSE American and rang the opening bell at the exchange. This was a momentous event for our company, its employees, and our shareholders. As I said at the beginning of our call, it has truly been a historic time here at the Arena Group, and we're just getting started. I want to talk more about what we have planned for this year, especially our soon-to-be-completed acquisition of AMG Parade. But first, I'd like to let Doug Smith, our Chief Financial Officer, take you through the numbers. Over to you, Doug.