The Arena Group Holdings, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Arena Group second quarter 2022 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Jeff Stanliss. Jeff, please go ahead.

Thank you. Hosting the call today are Ross Levinson, Chairman and Chief Executive Officer, and Doug Smith, Chief Financial Officer. Before we begin, I'd like to note that some of the comments made during this presentation may include forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. 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 introductions, and expansion plans, and the adequacy of the company's funding. Other statements contained in this presentation that are not historical facts are also forward-looking statements. The company cautions investors that any forward-looking statements presented in this presentation or that the company may make orally or in writing from time to time are based on the beliefs of, assumptions made, 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 factors that are beyond the company's control or ability to predict. although the company believes that its assumptions are reasonable. However, 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 in relying on forward-looking statements, which are based only on known results and trends at this time that they are made, to anticipate future results or trends. Certain risks are discussed in the company's filings with the SEC. And with that, I'd like to turn the call over to Ross Levinson. Ross, the call is yours.

Thank you, Jeff. Thanks, everybody, for joining. This marks two years since I was asked to lead the Arena Group as its CEO. We think of ourselves a bit as a startup. We architected a plan to be focused on growth. We set out to transform the company so that it was clear who we were, what we were doing, and with a goal of building a sustainable, profitable business driven and measured by data. Over the first two years of our journey, the results have been terrific. Revenues have grown nearly 2.5 times from $95 million to $234 million based on the four quarters ended June 30, 2022, versus the same period, 2020. Gross profit has expanded by 14 times in the same period, from 7 million to 99 million. We continue to move towards profitability. In the four quarters ending June 2020, we had an adjusted EBITDA loss of $18 million versus a loss of just 1.9 million during the last four quarters. And this quarter, we generated $5.8 million of positive net cash from operations, an improvement of 14.3 million from the same period last year, when we used 8.4 million in net cash from operations. And our audience numbers have grown exponentially, with page use topping 1.5 billion this quarter, which is up over 82% versus the same period last year. We are investing in our company because we are a growth company. We uplisted in February of this year to the NYSE American, and we were added to the Russell 2000 this June. We completed the purchase of Affon Media Group, including Parade, this quarter, adding a new lifestyle vertical to our company, and we have a robust pipeline of potential new acquisitions. We are committed to growing and improving our metrics sequentially each quarter. We have built a world-class management team and have recruited an amazing array of talent across our company, building for growth and building for the future. That startup mentality is one that we focus on and one that helps drive growth. As we stated last quarter, we have substantially completed all major investments to support growth of a much bigger company, all operating on a single technical platform and single infrastructure supporting hundreds of brands. These investments, our strategy, and our execution has helped fortify us as others have experienced the slowdown related to compression in the ad market and supply chain issues. We are not experiencing those same challenges in advertising. and are accelerating across all major KPIs, and the early signs in Q3 is that that momentum is continuing. However, we are not without challenges. On the print side of our business, surcharges on ink and paper, fuel, and distribution have impacted our margins slightly, and we have made several strategic decisions related to a few of our brands that have been both near-term positive and negative across the board. On the plus side, we have invested in our HubPages properties and have seen dramatic increases in audience and revenue. At SI Swimsuit, we pivoted the entirety of the brand and execution, and this, combined with the bankruptcy of a major sponsor, has impacted profitability for the brand and for our company in the quarter, but we believe in where we are headed and the upside for the future. More on that later. Two years ago, we pivoted our business strategy to focus on a powerful set of technology tools and services, establish a vertical content focus anchored by premier brands. We launched our proprietary playbook that has driven incredible traffic and revenue results across all our brands and committed to making the necessary investments in core elements of our business to enable long-term growth, stability, and profitability. We have built a strong foundation at the Arena Group over the past two years that has scaled and expanded without significant investments in our day-to-day operations, and that couldn't be more timely. As has been widely reported, this has been a difficult quarter for our industry, and we're seeing many of our competitors take a defensive position in fear of looming recession and advertising pullback. Thanks to our strong foundation, our business model and our audience growth, we have largely navigated the challenges. We have continued to grow. We have expanded our audience. Advertising partnerships have grown significantly, with direct sales accounts up nearly 50% from the same period one year ago, and second quarter display CPMs are up 41% versus the same period last year, excluding Parade. Our editorial teams continue to produce award-winning content. Our partners and contributors continue to deliver timely and highly relevant content that drives consumers to our sites. In short, we have a lot of good news to share with you this quarter. Let me kick things off by highlighting a few key results. Second quarter total revenue grew by 87% to 65.1 million versus 34.7 million in the previous year. Overall, second quarter digital revenues grew by 75% to 35.1 million, and that now accounts for 54% of total revenues, while our digital ad revenue was up 114% to 24.7 million. Other revenues was 4.9 million in the second quarter, up 463% from the previous year, reflecting the launch of the SI Swimsuit Edition in Q2 this year, versus Q3 of 2021, as well as significant growth in our syndication and licensing. Second quarter gross profit improved by 94% to 18.3 million compared to 9.4 million in the second quarter of 2021. Our adjusted EBITDA loss was 4.9 million as compared to a loss of 7.2 million in the second quarter of 2021. representing a loss reduction of nearly 2.3 million or 32%, and the company generated 5.8 million in net cash from operating activities, a $14.3 million improvement from the second quarter of last year. We have continued to see strong growth across all of our business lines, and we are optimistic about what's to come in the second half of the year. In our last earnings call in May, I discussed the many investments that we've made in our platform and businesses and that we reached the tipping point where we were seeing those investments pay off. That has continued to be the case in the second quarter. Our second quarter overall audience growth has been tremendous. Monthly average page views were up 82% across our company as compared to the prior year quarter. Our total page views for the quarter reached more than 1.5 billion, according to Google Analytics, a direct result of our playbook continuing to work even as the macroeconomic environment remains uncertain. Moreover, our second quarter digital ad revenue more than doubled compared to the prior year. Unlike many of our competitors, we are seeing no signs of an advertising pullback. In fact, our CPMs and RPMs have remained stable, and our pipeline is the strongest in our history. Second quarter display CPMs grew 41% versus the same period last year, excluding parade. And second quarter digital advertising rose 114% versus the same period last year. In Q2, we closed more direct advertising and sponsorship deals than any previous quarter, and we expect that total number of high-value deals to be more than double last year. With several major sporting events in Q2, such as the Masters, the NBA and NHL playoffs, and the NFL Draft, we had a very strong quarter in our sports vertical. Average monthly page views for our sports vertical were up 174% in Q2 versus the prior year, of which roughly half was due to the spun, which was acquired in June 2021. In the year since we acquired the Spun, their average monthly page views more than doubled from 47 million to 114 million, a testament to their hard work and the success of our playbook. Our FanNation business was another key growth driver for this quarter, with Q2 monthly average page view growth of 91% year over year, according to Google Analytics. We signed 27 new FanNation partner sites, during the quarter and added three additional publishing partners to our Sports Illustrated media group, rapidly expanding our content base at little to no upfront cost. The Sports Illustrated brand has continued its transformational growth this quarter as well. Earlier today, the Alliance for Audited Media released its Magazine 360 report, a measure of total magazine brand audience audiences across print, web, mobile, web, and video. Sports Illustrated was ranked as the number four fastest growing magazine brand, not just in sports, but all brands, measured as a comparison of the first half of 2022 audience compared to last year. SI's high quality sports journalism continues to resonate with readers on social media as well, as it has maintained its position atop all sports publishers, for Share a Voice for Link Stories on Facebook, according to CrowdTangle. The SI editorial team won several Associated Press Sports Editors Awards, including Beat Writer of the Year and first place in the Breaking News category. Just last month, the Football Writers Association of America presented its annual Edward Ashoff Rising Star Award to our very own Richard Johnson. Our editorial team continues to build upon Sports Illustrated's legacy of bringing powerful sports storytelling to life. Sports betting also continues to be a major area of focus for our business. SI Sportsbook, our sports betting platform run in partnership with 888 Holdings and ABG, launched in its second state, Virginia, at the end of May with plans to launch a third state by the end of the year. Our betting editorial coverage has driven a massive spike in traffic with second quarter betting related monthly average page views up 93% in compared to the prior year quarter according to Google Analytics. Our finance vertical has continued the strong momentum that we saw in Q1 with Q2 monthly average page views of 29 million per month according to Google Analytics representing a 157% increase versus the prior year period, and a 21% increase quarter over quarter. As a reminder, Jim Cramer departed the street in October 21. The street's online audience generated 9 million monthly page views then, according to Google Analytics. We are continuing to add diverse voices to the street's editorial coverage, covering a wide range of topics, and we are seeing continued success from the application of our breaking news content playbook, particularly as the markets become more uncertain. Our content is especially resonating on social media, where our second quarter Facebook engagement has grown 205% as compared to the prior quarter according to Listen First. Our lifestyle vertical has grown exponentially this quarter, thanks in large part to our acquisition of AMG Parade, which closed on April 1st. We moved Parade.com onto our platform in July and have been very successful in expanding our audience and revenue post-migration. One of the key growth initiatives in our lifestyle vertical is applying our playbook, our breaking and trending news content strategy, which has seen success in sports and finance. We launched Parade.com on our platform last month, and we're already seeing very strong results. Additionally, as I shared last quarter, we have been deploying components of our playbook on several of our HubPages sites, most notably our pets brand, Pet Helpful. We saw encouraging early success in Q1 and have seen that carry over into Q2 and beyond. HubPages monthly average page views in Q2 were 89 million, a 71% increase over the prior quarter according to Google Analytics. The Pet Helpful especially has seen remarkable growth with monthly average page views of 42 million for the quarter, an increase of over 600% year over year. We have continued to roll out the playbook to several smaller HubPages sites, including Den Garden, Delishably, Exemplar, and We Have Kids, and we've continued to see traffic increase almost immediately upon launch. demonstrating yet again that our playbook and model works and is reliable across almost any topic or website. Audience development has played a big role in our traffic growth this quarter across all verticals. Social video views in the first half of the year have increased 61% as compared to the first half 2021, according to Listen First. As we continue to focus on creating engaging content, that appeals to new, younger consumers on Instagram and TikTok. Through our audience development editorial teams, we've also seen a vast improvement in Google-based traffic, with second quarter sports and finance clicks up 94% year over year. SI continues to have the number one share of voice for link posts across major sports publishers, as I said earlier, on Facebook. In addition to advertising, we continue to diversify our monetization, Second quarter other revenues including licensing and syndication has increased by 4 million versus the prior year period now representing 7% of our total revenue compared to 2% in the prior year period. This was due in part to the inclusion of SI Swimsuit in the second quarter of the year versus the third quarter last year. It also reflects significant growth in our ongoing licensing syndication in e-commerce, with Pillar 4 Media, a leading e-commerce company to create new e-commerce content and drive affiliate revenue. In Q2, our e-commerce business drove 2.8 million in top-line affiliate sales across our platform. We expect e-commerce to become a more and more meaningful piece of our business throughout this year and next. We are not without challenges, and let me address a few. We are not without challenges. While our results continue to demonstrate strong year-over-year operating growth, our profit lines were slightly behind expectations. As I mentioned a few minutes ago, global economic challenges have contributed to surcharges from vendors across our print business, where transportation, fuel, paper and ink charges grew substantially, impacting our print business profitability, particularly for our recently acquired Parade magazine. I'd note that the integration of Parade.com onto our technology platform and the execution of our proprietary playbook has gone exceptionally well. And we are already seeing higher traffic levels and greater efficiency. One of our key initiatives over the balance of the year is right-sizing our print businesses at Parade, just as we did with Sports Illustrated over the first two years of operations. which may include things like frequency changes and other adjustments to better align this business with our digital focus and the economic realities of today. While our primary focus is on digital properties, we continue to view print as strategically important and a valuable business, especially the way we have proven this at SI. And with some adjustments, we see the strategic value to our business and for consumers. We also made major changes at our SI Swimsuit franchise this year, which directly impacted our quarter negatively by roughly $4 million. For more than 60 years, Sports Illustrated Swim has defined beauty and created an indelible imprint as a standalone brand within the SI ecosystem. Last year, Swim leadership and I agreed it was time to move Swim forward towards a more sustainable future. one which didn't solely center on beauty and one magazine launch per year, but created a 365-day experience in the community, in the female lifestyle realm. This pivot included no longer delivering the magazine as part of the SI print subscription, only making it available at newsstands or purchased online. Launching the Pay With Change initiative, which mandated that sponsors and advertisers supported female empowerment and investing in the development of content for digital channels year-round, as well as launching the Swimfluence network, which serves as a community-based incubator for future talent, brand deals, and initiatives. Swim will focus on advertising programs from companies with demonstrated programs to advance gender equality and drive progress for women empowerment. This was a conscious effort for the long term. While executing this shift, our largest partner, TRX, went bankrupt, immediately reducing our revenue for the quarter by $2 million. This coupled with our strategic change has created a $4 million shortfall for the quarter. Of note, last year, SWMM occurred in Q3. There is good news, however. The support for this initiative has added more than 25 new brands that showcased powerful female empowerment initiatives during both May's launch and immediately into July's dynamic three-day experience at Miami Swim Week. Four million more unique users year over year, more than 200 pieces of influencer and creator content, which will run over the next several months, and a record-setting number of press impressions. The launch of this year's issue drew 14 million users during the three months post-launch, compared to four million users during the three months post-launch last year. an increase of over 10 million users year-over-year, according to Google Analytics. So while we saw significant pressure in Q2, we believe SWIM will now contribute to our earnings year-round. Already, we are seeing increased audience, sponsorship interest, commerce and brand extensions, and new revenue potential. The strategy we architected over the past two years has transformed our business, specifically Our business model centers around a powerful and efficient single technology infrastructure and centralized services, essentially a SaaS model that can support hundreds of businesses without significant cost growth once scale is reached. We have reached that tipping point. Our playbook, a dynamic production, distribution, and analytical strategy has transformed each of our brands and is our blueprint for growth. Our content model is highly efficient with an anchor brand for each vertical and a partner model that delivers substantial content, audience, and revenue growth with no upfront costs. And our monetization engine utilizes technology, audience scale, and premium brands to advertise in a seamless, simple way for them to reach more than 500 million average monthly users across all our properties and all our platforms. Our audience, brands, and content scale are enabling new business lines to launch and grow, including licensing, syndication, and commerce initiatives that are beginning to deliver powerful growth and results. Our revenue streams are stable and diversified, and as I stated, we have built a strong foundation, and as a result, do not anticipate needing to add to our cost base to continue to grow. Over half of our incremental digital revenue continues to fall to the bottom line, driving profitability as our audience and traffic continue to expand. And finally, in June, the Arena Group was added to the Russell 2000 Index. I'd like to talk more about our outlook for the remainder of the year, but first, I'd like to let Doug Smith, our CFO, take you through the numbers. Doug.