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.

Thank you, Ross. Let me turn to the results. In the fourth quarter, revenue was approximately $61.2 million, up 44% compared to $42.4 million in the fourth quarter of last year. Breaking down our revenue, total digital revenue of $33.3 million represented 54% of the total and grew 50% versus the fourth quarter of last year. Digital advertising revenue comprised 23.5 million of that 33 million and increased 97% versus the fourth quarter of last year driven by higher traffic across all of our properties. Digital subscription revenue was 7.2 million in the fourth quarter of 2020, excuse me, 2021, down 15% as compared to 8.4 million for the fourth quarter of the prior year. Print revenue increased 38% to 27.9 million for the fourth quarter of 2021, primarily driven by a 56% increase in print subscription revenue, reflecting the drive to increase subscribers in the fourth quarter of 2020 and the diminishing effects of acquisition and counting adjustments on the subscribers that existed when we began operating Sports Illustrated Media Business. Other revenue, which is primarily digital licensing and e-commerce revenue, increased by 39% to $2.7 million during the fourth quarter of 2021. Gross profit margin for the quarter was 56% compared to 37% in the fourth quarter of last year. For the three months ended December 31, 2021, the cost of revenue grew only 1% over the prior year period, even with a 44% increase in revenue and a $6.7 million increase in stock-based compensation. This improvement reflected the high gross profit margin from our growing digital revenues. This drove a more than doubling of gross profit, increasing $8.5 million from $15.7 million in the fourth quarter of 2020 to $34.2 million in the fourth quarter of 2021. 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 over $9 million, reflecting the campaign I mentioned previously to increase Sports Illustrated subscriptions as well as an increase in stock-based compensation of $5.4 million and $0.7 million of losses recognized in asset and lease dispositions. The remaining increase in expenses is attributable to an increased investment that Ross referred to in our audience development, data analytics, and technology personnel, which helped drive the great results we're seeing in improving traffic across our platform. As a result, net loss improved 19.1 million for the fourth quarter of 2021 as compared to 22 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 million in the fourth quarter of the prior year, representing a $3.3 million quarter-over-quarter improvement. This reflected the strength of our business operations, as we already discussed, and also is exclusive of the $5.4 million increase in stock-based compensation. For the year, total revenue was $189.1 million as compared to $128 million in 2020 full year, an increase of 48%. The increase was primarily due to a 49% increase in total digital revenue to $101 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 vehicle, vertical, excuse me, and the addition of the spun. In addition, total print revenue increased 46% to $88.1 million for fiscal 2021 from $60.3 million in the prior year. Again, primarily driven by a 56% increase in print subscription revenue reflecting the successful drive increased subscribers in the fourth quarter of 2020 and the diminishing effect of acquisition accounting adjustments. Gross profit percentage was 41% for the year compared to 19% in 2020. 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 to 34% in fiscal 2021. This is related to the strategic shift that Ross mentioned to eliminate most publisher partner guarantees that we implemented at the end of 2020. It's also reflective of the very high contribution of digital advertising revenue. Net loss remained relatively flat year over year at 89.9 million in fiscal 2021 compared to the net loss of $89.2 million in 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 million of non-cash charges. From a balance sheet perspective and looking at liquidity, We ended the year essentially where we started at $9.9 million in cash compared to $9.5 million at the end of 2020. For the year, we used net cash from operations of $14.7 million, an improvement from a use of $17.6 million, excuse me, an improvement of $17.6 million in the use of $32.3 million from operations last year. Improvement was primarily a result of the increase in revenue, which led to additional cash collections, a general improvement in our working capital efficiency. Also, as mentioned, subsequent to the end of the year, the company raised $31.5 million in net proceeds from an offering of its common stock. With that, I'll turn the call back over to Ross for closing comments. Ross?

Thanks. Thanks, Doug. If anything, this year we have repeatedly proven the effectiveness of our model across a wide array of properties with iconic household media brands such as Sports Illustrated, digital legacy brands like The Street, a younger digital native startup like The Spun, and smaller entrepreneurial publishers across Fan Nation and Fadeaway World. We are now listed on a primary exchange with a proven business model and a platform we can scale profitably. We crossed the Rubicon in 2021 and I am extremely optimistic about what's on the other side. In January of 2022, we announced our plan to acquire AMG Parade Media Group, a premium multimedia content company with lifestyle, celebrity, food, health and wellness, sports, and outdoor verticals, including Parade Media, AMG Parade Sports, Relish, Spry Living, and other lifestyle and outdoor properties. Due diligence, and the other related efforts to close this acquisition have continued to progress. We expect to complete this acquisition in the next few weeks. Similarly, in some ways to Sports Illustrated, Parade is an iconic household brand with an 80-year history of connecting consumers to the celebrities and lifestyle trends that they love. Our teams have been working seamlessly together to ensure a smooth transition And we are so excited to welcome AMG on board and launch our third vertical, Lifestyle and Entertainment, with Parade as its centerpiece and to expand our sports coverage with Athlon Sports and Outdoors. This year, we will be leaning heavily into deploying the Arena Playbook across our properties, including Parade. During the first quarter, we began implementing the Playbook with our pet site, Pet Helpful. And we're very excited about the early results we're seeing. We will be bringing the same transformative energy to AMG Parade and look forward to talking to you about those results in the next quarter. Again, our platform is proven and scalable. We know we can grow traffic, increase users, and drive revenue. And with the investments already made, incremental revenue leads to margin expansion. And with that, I would love to answer any questions you have. So over to you, operator.

Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while I poll for questions. Your first question is coming from Mark Argento from Lake Street. Your line is live.

Hey, Ross. Hey, Doug. Thanks for taking my questions. Just a couple high level and then maybe a couple more housekeeping. You guys have obviously integrated a bunch of different properties and replatformed a few of them. When we sit back and we kind of analyze the company and also from your seat as well, what are the best ways, the best KPIs that you guys track or that we should be looking at here in terms of getting left? Is it traffic? Is it CPMs? Maybe just help us think about what your dashboard looks like and what we should be keying off of other than just obviously revenues and EBITDA.

Sure. Thanks, Mark, and thanks for your support as always. We have a very, very robust set of KPIs that we track, and we track them almost by the minute. Certainly at the highest level we track audience, impressions, CPMs, RPMs, average pages per visit. And when you put those all together you can really draw a picture of how the business is doing. We also look, depending on the type of business that we are running, at subscriptions. And soon we will be looking at e-commerce conversion. which we are adding to our site. So what we generally see and have seen fairly consistently is greater audience equals greater share. Obviously, if CPMs go up, while audience and impressions go up, we make a lot more money. Sometimes as you follow the trends, CPMs tend to grow or ebb and flow certainly throughout the year. In many cases, it's seasonal with Q4 being the most robust of the four quarters. And we usually start out the year on a fairly lower basis than Q4. So when CPMs and RPMs go up, an audience goes up, we know we've got a winner on our hands and we've been successful thus far in tracking all of those. You know, we talked a lot about in the narrative today about the investments we made, and we really did put a fair amount of resource into building out our business intelligence and data unit. We brought in some great top talent to help us do that so we can track all those key KPIs. I'll let Doug chime in, too, if you'd like.

Yeah, I mean, I think what Ross was saying also is, you know, we invested heavily in our audience development during 2021. And that has really been a key driver of the growth in audience that we talked about here. And that's, you know, at the highest level of the funnel. And so we've seen great success there. We've also seen improvements in our CPMs and RPMs as well. But the focus is initially on the top level. and then continuing to improve as we go down. So, um, we're very happy with the results we've seen and we're seeing them, uh, you know, on a daily basis. And, uh, we, we plan to continue to work on improving all the way down the funnel.

Yeah, I would add just on top of it, um, we, we really made, uh, in addition to, to the data side of the business, we, we made a real investment in our audience development and social teams. I highlighted it in the narrative. We are now the number one site for share of voice on Facebook. A year ago we didn't even really rank. So to go from really zero to number one is a pretty great achievement for this team. And obviously, that leads to significant traffic, different demographics, and a much greater share of voice for us.

Let's appreciate the color there. And, you know, specifically on the Spun, I know it seems like you guys have had a decent amount of success as you brought that property onto the platform. What was it that you guys did? Was it, you know, that you had a good SI audience already and then the Spun kind of helped turbocharge that? Or, well, you know, maybe you could just, you know, kind of peel the onion a little bit for us on how you got those types of results.

Yeah, sure. As we said, the Spuns audience has really grown since coming over into our ecosystem. We've said this over the last year and a half, having a great brand and a great domain matters. Driving audience around that ecosystem is important. The Spun brought something different. We certainly have, I think and I would argue, the best quality journalism on the internet derived from the Sports Illustrated editorial group. Nobody's really doing the types of stories and the work they're doing out there. And obviously the magazine continues to receive awards and rave reviews. Great work by our team of Ryan Hunt and Steve Cannella and everyone there. The Spun brought a different look at sports. It really focused on what was trending, what breaking news there was. And we've built out a model and a playbook to really swarm stories. So we're taking a lot of different looks at it. When something big happens in the world of sports, whether it's St. Peter's advancing to the final eight, or it's Tyreek Hill being traded from Kansas City to Miami, we have multiple takes on that story. And the Spun brought really an energy and efficiency and brought it to our platform. So it benefited from our entire ecosystem, a great domain, a terrific monetization apparatus that we have, the ability to drive traffic across the ecosystem. and they brought speed, they brought volume, and we've seen it all sort of click. We learned from them and they've learned from us, and it's been a great partnership, and I'm super proud of the results. We've generated a significant amount of revenue from them at very low costs, and it's really not only from a financial side, it has helped our overall business In what they brought to us, we've taken some of their learnings and put it into our playbook, and that's resonating now at the street. It's resonating at other sports properties that we have, and we're going to bring some of that magic to Parade.

I appreciate it, and good luck this year, guys. Thank you, Mark.

Thank you. Your next question is coming from Dan Day from B. Reilly Securities. Your line is live.

Yeah, afternoon, guys. Appreciate you taking my questions here. So similar question to the one about getting under the hood at Sports Illustrated. Maybe if we could do the same at the street. Obviously, you know, following the Kramer departure, you've done an awesome job driving traffic to the sort of ad-supported side of that business. So, I mean, just what's under the hood there? Is it, you know, people you've hired, a different shift in editorial priorities? Is it just anything you can provide there to get that increase in traffic to the what's driving that would be helpful.

Yeah, great. Thanks for the question. You know, there's really only one Jim Cramer in the world, and he's an enterprise unto himself, and we wish him the best at CNBC. We brought in a new editorial team. We applied our playbook, and we broadened the aperture and the lens of how we were covering not only Wall Street, but business and companies that are public, going public or creating news in the business and financial And I have to tell you, just unbelievable transformation at the street in such a short period of time. As we said in our script, growing from four or five million users to 16, 18 in a few months is terrific. And we're seeing that growth accelerate just pretty dramatically in Q1. So not only is there a direct effect in terms of the ad revenue, as we talked about from the question Mark asked, which was how do you look at KPIs? Well, you have more users, you have more page views, you have more ad impressions, and you have good CPMs and RPMs, and you see more revenue. So we're trending very, very well at the start of this year with the street. But it also brings more eyeballs and more people into the top of the funnel in our job Part of our job in the finance category as well as sports is to drive people through the funnel and convert them to paying subscribers. So while there was significant concern, certainly from some in the investment community, that the loss of Kramer would have just very difficult and hard effect on our business, it actually freed us up to a degree to try some new things and do some new things. And it's worked wonderfully. So as we said, we've retained about 86% of our subscriptions since Jim left. And we've grown our audience four or five-fold. So the future is bright for the street. And we're looking at some new products. We just launched in beta a new subscription product two weeks ago called Street Smarts, which you can find on thestreet.com. and we expect to launch more products in the months ahead. So we really have opened the creative lens at the street and seen the results, which have been fantastic.

Great. Thanks, Ross. And then maybe one for Doug. And Doug, it's just something you and I have talked about, but there's a lot of kind of first-time investors looking at their results here. And just at face value, the stock-based compensation looks elevated. So maybe just kind of walk through the accounting issues and, you know, why that looks so elevated for a company of your size and just any of your thoughts on that.

Sure. The stock-based compensation was $30.4 million for the year, which is extremely high relative to our total compensation, you know, cash compensation for our employees. I think some of the key drivers are in that or, you know, were required to use Black-Scholes models in calculating that. And, you know, when we were listed on the pink sheets, we had just enough coverage to have to use the prices there in doing our calculation. But, you know, we had to make, you know, come by invitation to do a trade and and the smallest trades would create huge volatility in the stock. So the beta of the stock used in Black-Scholes model creates an extremely high relative value on stock-based compensation. And unfortunately, at the time the options are issued, the stock-based compensation is determined and then it is just amortized over the vesting period of those shares. So there's nothing we can do to go back and change it. No changes in market conditions will change it.

Got it. Understood. I think that'll be helpful for a lot of people when they see that. Just last one for me. You kind of mentioned in the press release opportunities and NFTs and Metaverse. I noticed Sports Illustrated had a release out It was mostly mentioned at ABG in a partnership with 1UP about selling sort of NFT that covers just any upside you guys might have to that venture or anything you can provide on that. And then just anything else around a little more meat on the bone on that comment as it relates to sports or any of the other verticals.

Yeah, obviously we work closely almost daily with ABG. They have certain rights. We have certain rights. And they were really the architect or the architect of that NFT release. And they're working hard to figure out ways to continue to grow it, not just for Sports Illustrated, but for some of their other brands out in the marketplace. For us, we have a plethora of brands here, including Sports Illustrated. We're working through a bunch of fairly dynamic ideas related to how NFTs could play into our subscriptions, what about the metaverse, how do you showcase our brands inside of the new world of the metaverse or the third version of the Internet. We've all been around it for many years. You know, Parade is going to bring us, you know, 80 years of history, some of the great covers, some things like the Parade High School All-American team, which for me growing up watching Bob Hope host that show, we're excited to to dive into that and bring that back into the world of Parade and Athlon Sports. So we've got a number of discussions going with some very good players in both the metaverse and the NFT space for the brands that we own and operate and control and also for some of our partners. I'm not going to foreshadow anything other than to tell you we've been doing our homework, meeting with the right people. We expect to announce something in the coming months. And I think you'll see us tread into both of those categories. you know, in a way that is representative of the brands that we have. So nothing concrete that I want to share today, but I'm certain by next earnings we'll have a lot more detail on it.

Awesome, guys. Again, appreciate you taking my questions, and I'll turn it over.

Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone at this time. Your next question is coming from Kevin Ranvino from 180 Degree Capital. Your line is live.

Thanks, guys. Actually, both my questions were answered. The street performance is someone who is close to that asset is incredible. And so, Ross, is that something that's applicable only to the street, or did your playbook that you're applying to other brands, Spun, Sports Illustrated, and the rest, apply to the street, trying to figure out if it's street related or if it's sort of company technology related, which would show how successful the platform is.

Yeah, great question, Kevin. Thanks. And I know, you know, you've got a lot of time, energy and capital invested in the history of the street. We thank you for that. It's a combination. You know, none of this would be possible without the great brand. None of it would be possible, and I have to give really huge kudos to our content team and our media group led by Rob Barrett. The new editorial leadership at The Street has really transformed what you see there, and that is super critical. Also, the investment we made in our audience development team has helped us grow just exponentially related to audience and also our share of voice as we mentioned in the press release on Facebook and social platforms for the street which is I think up over 500%. Just unbelievable growth in a very, very short period of time. And lastly but not least, none of this works as I said in the script. You've got to have, in the football analogy, Your offensive line better be good. And for us, our offensive line is our technology and the work that our product and engineering group does each and every day to operate, support more than 200 brands, all on a single infrastructure. That really is the engine that drives our entire business and I'm super proud of the decisions we made over the last year and a half of what to do and also what not to do. We sunsetted a lot of technology and we invested in others and in people and it's really a testament to the work that's being done on the technology side, on the product side, on the engineering side. All of us who operate businesses are living through the great resignation, right? people are leaving businesses really for no jobs. And we've managed to not only retain our employees, but also, you know, hire some really, really stunning talent. So, you know, that's a testament to where we're going. And we need those folks to make this whole business run. And, you know, you've got to have the brand, you've got to have the leadership and the strategy, and then you have to go execute. And, you know, we're sort of clicking on each one of those. And And, you know, I can't emphasize enough, Kevin, you know, the transition we've made and how it's really playing out. You know, I kind of can't wait for our Q1 earnings at this point because obviously we have visibility. But, you know, we're off to a running start and really happy. You know, the groundwork we laid from September of 20, really to the middle of last year, started to pay off in Q3 and then Q4, and we're seeing that momentum go pretty fast right now in Q1.

That's great. It's nice to see the idea be at its turning point right now, so that's awesome. Just one other quick question, and then maybe just a big generic question, but are the two new verticals that you were talking about, is that the metaverse and crypto, or are we talking about something different?

No, yeah, those are, for us, those are new business lines. What we're really thinking about, you know, Parade will be our, will anchor the lifestyle vertical for us. And, you know, interestingly, within lifestyle, that touches a lot of different areas. You know, we look at celebrity and entertainment. You know, certainly, probably a lot of us were watching last night and that incident, you know, sort of with Will Smith and And Chris Rock kind of broke the Internet last night. But it also is health and wellness, and it is also home and gardens, and it's also food and travel. And so we think actually Parade is an overarching brand. The work that they've done both in print and in digital has been very, very interesting over the last couple of years. Their partnerships with more than, I think 900 newspapers that they bring to our company is going to be, I think, leverageable for the content we produce in sports, and in finance, and in pets, and other areas. So metaverse, audio, podcasting, NFTs, e-commerce are all new lines for us that are coming this year or already here in the case of audio and e-commerce. But we're excited to be able to launch a lifestyle vertical that will touch on a lot of different content categories.

Okay. And then lastly, I mean, you're a big company CEO, so we know where you came from. How scalable is your playbook, Ross? I mean, you've done a ton of work in the last 18 months, and now you're on an inflection point. How scalable is your playbook?

It's pretty darn scalable. I will tell you, I've had a pretty interesting career at companies as big as Yahoo and News Corp and Fox and also worked at a startup in the 90s and a big search engine called AltaVista, also in the late 90s, early 2000s. This for me has the most upside I've seen in any of the companies I worked with or for. I'm as excited as I've ever been in my career in terms of what we're seeing. Again, I use a lot of sports terms and analogies because I love sports, I played sports. There's something compounding about winning And we've had a darn good streak here going for the last several months. And I think we've now applied this playbook seven times, and seven times it's worked. So that gives me great confidence as we bring Parade onto the platform. And sign more partnerships, or go acquire other businesses that this model really, really works. And we track it literally every minute of every day. And you can't just set it and go. You really have to work it, and we're doing that, and the teams are doing that.

Thanks a lot for answering the questions. Love the offensive line analogy, and good luck. We'll talk to you soon. Okay, great.

Thanks, Caleb.

Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone at this time. Please hold while you poll for questions. Your next question is coming from John Fitzthorn from Dialectic Capital. Your line is live.

Hey, guys. Thanks for taking my question. And nice job this year. Really impressive. I was just wondering, I missed part of it, so maybe you covered this, but to the extent you can, I'd love for you to talk about either organic versus inorganic growth expectations for this year and kind of what you're seeing. It looks like the business is growing really rapidly, but I didn't see guidance, so I'm just kind of wondering if you can give us some brackets or some ways to think about how fast the business is growing organically.

Yeah, hey, thanks, John. We haven't given guidance. We're not giving guidance, but we're excited to get to Q1 earnings in May, I believe. As you know, we're adding Parade. That is our first inorganic acquisition or inorganic growth for this year, and we've set some specific internal guidelines for what our expectations are there. I guess the best I can say is we're very, very confident about our playbook. We're going to be very, very careful on the acquisition side. We've been successful over the last year. We focused on really building the infrastructure and our plan out, and then we did the spun in June, and that's really, really done well. Interestingly, in applying the playbook, that we have to our current properties, it doesn't really add any costs to our business, but the results are pretty stunning, whether it be SI or The Street or now Pet Helpful, which was a site that we got as part of the HubPages acquisition. There were 30 plus sites at HubPages, and our leader there, Paul Edmondson, is leading the charge there, and we've seen very, very strong an application of the playbook to Pet Helpful and very strong growth. In the early days, we've just launched it on two more sites within the HubPages network and we'll track that and obviously hopefully have some good numbers to present in Q1 and then watching it in Q2. We are focused on organic growth. We do have very clear metrics and KPIs for our existing business and for Parade coming in. And then we're going to be opportunistic in the marketplace, and it really helps us to set very clear numbers for anything we want to acquire, whether it be a new vertical or to support an existing vertical or to even add a horizontal capability to our business. And, you know, with the size and scale that we're at to go from, you know, pretty much when we started this journey in the fall of 2020, I think we were hovering around number 100 on the comp score list. And to be at 34 is pretty unprecedented. And obviously, as you know, You know, sports, when we took over the operations for SI, you know, minus some of another piece of business that we didn't get when we took over the operations, a company called Fansighted, we've been able to grow Sports Illustrated's comp score number and move into the top four, you know, eight or nine or tenfold from when we took it over. So, This playbook is working, and it's working repeatedly, so it gives us great confidence for organic growth.

Are you able to kind of discern which is the easiest or biggest organic or growth driver for you, whether that's horizontal applications, applying e-commerce to the rest of the verticals or whatever it may be, or whether it's inorganic growth or adding new verticals? Is it apparent at this point which is easier or not? Better growth opportunities.

Yeah, I mean, look, I would tell you I have a lot of excitement about the celebrity or entertainment category. It is the closest thing to sports that's out there that we see because it's the gift that gives every day. You know, you do have Super Bowls like the Oscars. There was a lot of talk leading up to last night about the death of the Oscars and nobody's watching it anymore. And then, you know, an event like last night happens and The early numbers that I saw were pretty substantial. But there's so much going on in that category that we're excited to apply the playbook now. I think you're asking, well, what's the upside? Where do you see it? It's got to come from good content, and you've got to do it in the right way, and you've got to do it efficiently. You've got to do it fast. You've got to do stories that matter to consumers. Then you have to amplify them across all platforms. It's not the media business of the 1970s. You have to go where the consumer is, and that's why we really did invest significantly in audience development. And that is, just to be clear, some people say audience development means audience buying. We are not buying our audience. We're out there working it in a way that's organic to those platforms. We do spend money in advertising, but the majority of the growth, the vast majority of the growth is all from organic growth across social platforms. So that's really good and really important. It's really good to have the right content that consumers want. It's critical that our platform operates and works. The speed of our pages is good. We're working very closely with Google and Facebook to ensure that we're positioned well and that the pages work well, and that's a testament to our product and engineering teams.

Great. Two more quick ones you probably can't necessarily answer either, but I'm going to ask them. One is I'd love thoughts on seasonality at this point with all the different businesses. I'm sure it's changed over previously. And then just another question about recurring revenue and kind of how you think about that, what that is as a percentage, if you can tell us, and how you think the growth is in that particular area.

Yeah, in terms of seasonality, you know, sports is a big chunk of our business and, you know, And there's a pretty interesting thing going on in the sports world now where, you know, football used to be an August to January business, and now it's pretty much a year-round business. So, you know, whether it's trades or, you know, April's going to be a very, very big month in the NFL draft, as you know. And, you know, so sports is less seasonal than it's been. And it's really year-round in a big, big way. We got World Cup later this year, which I think will have an impact. The street, you know, certainly benefits from volatility. You know, the markets have been, I don't have to tell anybody on this call, pretty interesting. So people are following, and there's a lot of news there. So that's great. And as I mentioned, entertainment, you know, and lifestyle, I think, is going to be a real growth area for us. Doug, why don't you take the... the other piece on the percentage of recurring revenue.

Yeah, so for fiscal 2021 subscriptions, which represent both digital and print subscriptions, represented 57% of our total revenue, recurring revenue. Now, we do expect that over time, the strong growth that we're seeing in digital advertising will increase Reduce that percentage closer to 50% over time, but very strong at 57% right now.

Great. Thanks, guys. Good luck.

Thanks, John. Thank you. That concludes our Q&A session. I will now hand the conference back to CEO Ross Levinson for closing remarks. Please go ahead.

I want to thank you all for joining us today, and we look forward to speaking with you all again for our Q1 earnings in May. So thanks again, and I wish you all a great day.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.