The Arena Group Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Arena Group third quarter 2022 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Rob Fink, Investor Relations. Rob, the floor is yours.

Thank you, Operator. The hostings of all today are Ross Levinson, Chairman and Chief Executive Officer, Doug Smith, Chief Financial Officer, and Andrew Kraft, Chief Operating 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. Forward-looking statements relate to future events, future performance, and include, without limitation, statements concerning company's business strategy, future revenues, market growth, capital requirements, product introduction, an expansion plan, and the added suite of the company's funding. Other statements contained in the presentation that are not historical facts are also forward-looking. Company cautions investors that any forward-looking statements presented in this presentation or the company may take orally or in writing from time to time are based on the beliefs, assumptions made by, and information currently available to the company. Such statements are based on assumptions, and the actual outcomes will be affected by known and unknown risks, friends, 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 guaranteed a future for 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 cautious 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 made with the SEC. In addition, references will be made to non-GAAP financial measures. Adjusted EBITDA information regarding the reconciliation of this non-GAAP to GAAP measure can be found in the press release that was issued this afternoon. and on the company's investor relations website. With all that said, I'd like to turn the call over to Ross. Ross, the call is yours.

Thank you, Rob. Thank you all for joining us today. The third quarter has been a time of incredible growth at the Arena Group with some of the strongest results in our company's history. In Q3, we generated more revenue than in any quarter in our company's history. We were profitable for the quarter on an adjusted EBITDA basis, We expanded audience and engagement across all our properties, and we are now the 35th largest publisher with nearly 100 million users in the United States, according to Comscore. That's up 18 spots from number 54 at this time last year. We significantly improved our digital advertising line and our yield from advertising in Q3 2021 and from last quarter. We continue to see acceleration on the digital ad side of the business. I'm so proud of our ad sales and marketing team for driving this incredible growth. We managed our cost aggressively, reducing our operating expenses versus Q3 of last year by more than $10 million, while growing revenue by 12%. 86% of our growth in digital advertising was organic, and our acquisitions have both paraded and morning read are off to tremendous starts. For the first nine months of the year, our performance has been incredibly strong. We've grown revenue by 41% to 180 million, gross profit has improved by 44% to 64.3 million, our net loss has narrowed by over 13 million, and our adjusted EBITDA has improved by 76% to negative 3.1 million, And most importantly, we expect to see full-year profitability this year. Against the backdrop of a very difficult economic climate, we outperformed the industry, and that momentum has continued into Q4. I could not be prouder of this team and our mission to build one of the most dynamic consumer businesses in our sector. Let me take you through a few key results. Third quarter total revenue grew by 12%. to 66.7 million versus 59.6 million in the previous year period, the highest quarterly revenue in our company's history. Of note, last year in Q3, we had both the Summer Olympics as well as the debut of our 2021 swimsuit issue, which this year occurred in the second quarter. In the third quarter last year, these events contributed a combined $4 million to our revenue line. Yet even without these two staples and in the face of a recession, we grew our revenue by 12% year over year. Third quarter digital revenue grew by 26% to 38 million and now accounts for 57% of total revenues as compared to 54% last quarter and 51% during the same period last year. Digital advertising revenue increased 56% in the third quarter to a record 28.5 million from 18.3 million in the period last year. Other revenue, including licensing events and sponsorships, was 4.8 million in the third quarter, up 15% from the previous year. Our third quarter RPMs expanded, growing 10% as compared to the same period last year and growing 17% as compared to the second quarter of this year. we are seeing yield improve. Third quarter gross profit was 26.2 million, a slight decrease of 4% compared to a gross profit of 27.4 million in the prior year quarter. Again, this prior year quarter included the Summer Olympics and the release of SI Swimsuit, which together contributed approximately $4 million to our 2021 revenues. This year, SI Swimsuit's launch took place in the second quarter. Our year-to-date operating expenses increased by only 1% against revenue growth of 41% during the same period, reflecting our commitment to manage our costs aggressively while driving growth in key areas. Third quarter net loss improved by more than $8 million to 16.5 million. Of note, more than 100% of that 16.5 million was comprised of non-cash charges. Adjusted EBITDA was 3 million for the quarter as compared to 3.3 million in the third quarter of 21. However, last year, 3 million of the 3.3 million was a result of an accounting benefit in print subscriptions and an accounting benefit in agency fees. Our year-to-date adjusted EBITDA improved by 76% for $10 million. to a loss of $3.1 million as compared to a loss of $13.2 million during the same period last year. We expect to deliver positive adjusted EBITDA in the fourth quarter and for the full year 2022. These results we are sharing today, especially given the backdrop of very challenging economic times and almost universal pullback from our competitive set, demonstrate the strength of our company, our business plan, the laser focus on operations, and the foundations we've laid over the past two years. During the past few quarterly earnings calls, I have emphasized that strategic investments that we made in 2020 and 2021 to transform our business. And it's clear from these results that those investments are paying off. While others in our industry are dialing back, our growth continues to accelerate, both on the top and bottom lines, driving value for our partners, our company, our employees, and our shareholders. Of course, given these uncertain times, we continue to be extremely disciplined about how and where we deploy our resources and how we manage our business. As I highlighted earlier, we continue to manage our operations aggressively, investing in high-growth areas eliminating operations which we believe are not built for the future, and keeping a close eye on headcount and spending across the board. We've taken actions this quarter to both optimize and accelerate our business in the coming months and years. In September, we announced that we had made the difficult decision to wind down Parade's print business. We acquired a broad set of assets when we completed the AMG Parade acquisition in April. Over the past five months, we have invested in the Parade and Athlon digital businesses and concluded that we should wind down the Parade print operations. I want to thank all the employees who spent many years working on this incredible asset, and I'm very confident about the future of this brand. While it's never easy to close down a business, especially one that's been in operation for so many years, we are confident that by shifting our resources from print operations to Parade's digital business, we will not only protect but strengthen Parade's legacy of providing high-quality entertainment and lifestyle content to consumers. That decision is already paying off. Parade's Q3 digital revenue is up 70% compared to the prior year quarter under previous management. and monthly average page views are up 18% sequentially compared to Q2 according to Google Analytics. We have taken great care to work closely with our partners throughout the newspaper industry to ensure continuity of service and expanded opportunities on the digital side. I'd like to mention our incredible distribution team led by Kevin Craig for their tireless work with more than 900 newspaper partners We've had significant interest from many of those partners in working with us on the digital side and with our parade e-edition. We continue to look for assets that we can either acquire or partner with in a highly accretive way. We have a healthy pipeline of opportunities to expand our vertical model and brand portfolio in the coming months. In September, we announced our acquisition for our golf partner, The Morning Read, with whom we've partnered for over a year now. The acquisition and subsequent launch of SI Golf has brought high quality golf content to our audiences during the most dynamic time in golf history. By fully bringing the morning read into the arena group and expanding our playbook, we are confident that we will see the same strong traffic growth that we've driven across other properties. We are also diversifying and devoting resources to growth opportunities where we see the most value across the arena group. In particular, e-commerce and syndication and licensing. Our e-commerce business continues to grow with over 2.4 million in products sold via Sports Illustrated in the street in Q3. During Prime Day in July, we averaged a 63% click-through rate and a 22% conversion rate. on our extensive coverage across multiple brands. We plan to continue to expand our e-commerce capabilities in Q4 and beyond. Our Q3 syndication business and revenue far exceeded our expectations as we added new licensing partners and expanded existing deals, and we anticipate further growth in the future. Our audience development team continues to see strong follower growth across all social channels. where we also saw record social video views as we continue to focus on this high growth area of the market. Overall audience growth has been strong yet again. In September, the Arena Group ranked as the 35th largest publisher in the US, according to Comscore, up nine spots from number 43 in August, and up 18 spots from number 54 from the same time last year. It's clear that our strategy and our playbook are working across our more than 250 brands. In our sports vertical, our audience continues to grow, with the Sports Illustrated Media Group reaching the number four spot according to Comscore rankings in the sports category in September. In addition, yesterday, the Alliance for Audited Media released its Magazine 360 report, a measure of total magazine brand audiences across print, web, mobile web, and video. Sports Illustrated is ranked as the second fastest-growing magazine brand, measured as a comparison of the first nine months of 2022 audience compared to last year. These are huge achievements for our teams and reflect the breadth and depth of our sports content, from high-quality sports journalism from Sports Illustrated to breaking and trending sports news from The Spun, to deep team content from our fan nation publishing partners. We've also started applying our playbook to Athlon Sports, which we acquired as part of the AMG Parade acquisition in April. As a result, Athlon's monthly average page views for the third quarter increased five-fold, quarter over quarter, according to Google Analytics, another testament to the repeated success of our playbook. In the finance vertical, we've continued to see strong traffic growth as we diversify the street's editorial voices. It has been a full year since Jim Cramer left the street, and the street's monthly average page views and digital advertising revenue in the third quarter have more than tripled year over year. We continue to see the street's content resonate on social platforms as well, with a 48% increase in Facebook engagement in Q3 compared to the prior year quarter, according to Listen First. We have also opened our news desk on the floor of the New York Stock Exchange, and Twitter video views have increased by 62% in Q3 as compared to Q2, according to Listen First, as we continue to focus on producing high-quality live video content. In our lifestyle vertical, anchored by Parade, we have driven strong traffic growth on Parade.com since acquiring the property in April, and I'm proud to share that just last month, for the first time, the Parade Lifestyle Group broke the top 10 in the ComScore rankings of all lifestyle publishers. We're very optimistic about continued growth at Parade, especially as we allocate resources from the print business to our digital businesses. At our HubPages business, our playbook and content strategy have now expanded across 10 sites with plans to double that number in 2023. As a result of this strategy, our total HubPages monthly average page views in Q3 grew by 92%, or 88.2 million from the same period last year. I'm extremely proud of the growth that we've achieved across all of our verticals this quarter. I'd like to share more about our outlook for the fourth quarter and beyond, but first I'd like to let Doug Smith, our Chief Financial Officer, take you through the numbers. Doug?