Company Highlights Success of Recent
Restructurings, Majority Shareholder Significantly Increases
Financial Commitment for Future Growth
The Arena Group Holdings, Inc. (NYSE American: AREN), today
provided an operational update and reported financial results for
the three months ended June 30, 2024.
Management Commentary
“Nearly all of our cost reduction initiatives are complete,
leading to an expected over $40 million in eliminated costs on an
annual basis,” commented Sara Silverstein, The Arena Group’s Chief
Executive Officer. “As a result, our net losses significantly
narrowed, demonstrating that we are on the right path.”
“We achieved positive Adjusted EBITDA in the current quarter
with performance increasing significantly within the quarter from
April to June 2024,” she added. “Excluding non-recurring severance
charges and higher legal fees would have delivered profitability in
June. We anticipate being able to report to our shareholders
further improvements in the second half of this year due to the
continued phase-out of restructuring costs, increased operational
efficiencies and modest organic growth.”
Expanded Line of Credit, Increased Liquidity and Termination
of Business Combination Agreement
“I want to be clear: I am as committed to The Arena Group today
as I have ever been, particularly in light of the shift towards
profitability and the success of new leadership in such a short
period of time,” commented Manoj Bhargava, owner of Simplify
Inventions, LLC (“Simplify”).
Shortly after the opening of business on Monday, August 19,
2024, the Board of Directors of The Arena Group, and the ownership
of Simplify finalized previously disclosed negotiations around
alternative structures or options to the business combination
agreement. As a result, The Arena Group and Simplify mutually
agreed to terminate the business combination agreement in light of
changes in the structures of both organizations. To increase the
strength of the Company’s balance sheet and to address liquidity
concerns, Simplify has agreed to:
- Increase the Company’s existing $25 million line of credit with
Simplify to $50 million;
- Convert $15 million drawn on the line of credit to common
equity based on today’s 60-day volume-weighted average stock price
(VWAP); and
- Line of Credit maturity date extended to December 1, 2026.
“In the months since our pending business combination with
Bridge Media was first agreed to, The Arena Group has ended its
management of Sports Illustrated and the Bridge Media assets have
not performed to expectations,” continued Ms. Silverstein. “As a
result, combining the assets of The Arena Group and Bridge Media no
longer made sense. We have terminated the business combination and
will move forward as a significantly strengthened stand-alone
company with the continued support of our majority shareholder,
Simplify.”
Though the expansion and modification of terms on the existing
line of credit with Simplify increase liquidity and strengthen The
Arena Group, these changes do not alleviate all conditions that
raised substantial doubt about The Arena Group’s ability to
continue as a going concern as previously disclosed.
Second Quarter Business Highlights
- Sports Vertical: The new management team overhauled the
structure and business model of the Athlon Sports brand, shifting
from a fixed to a variable cost model. Following the exiting of the
Sports Illustrated brand, the new framework reached strong
operational performance in six weeks. Traffic increased nearly
four-fold from the first to the second quarter of 2024, reaching
more than 150 million pageviews. This represents an increase of
over 600% year over year.
- Finance Vertical: This vertical produced the best
quarter on record by delivering a year over year increase of over
750% in markets team page view traffic and diversifying and
solidifying revenue streams through affiliate commerce, the
relaunch of a new and improved TheStreet Pro subscription offering,
and the launch of the Come Cruise with Me site and newsletter.
- Lifestyle Vertical: The Company’s lifestyle vertical
achieved the highest April and May traffic on record and delivered
record vertical revenue. A continued focus on the health category
resulted in major pharmaceutical and healthcare sponsorships. The
Company published four newsstand issues of Parade magazine sold
exclusively in Dollar Tree stores and launched a new Best Reads
channel.
- Commerce Vertical: Revenue growth in the commerce
vertical accelerated in the current quarter and the Company
delivered year-over-year increases in both content output and
revenue as compared to second quarter of 2023.
- Adventure Vertical: Traffic in the adventure vertical
nearly doubled year over year as compared to the second quarter of
2023 while remaining stable as compared to the first quarter of
2024. The Company launched the first integrated campaign across
digital, social and video on all sites and published the first
digital cover of Men’s Journal since March 2023.
Second Quarter 2024 Financial Results
Total revenue was $27.2 million compared to $34.1 million for
the second quarter last year, a decrease of 20.2%, reflecting a
decrease in print revenue of $2.8 million due primarily to the
shutdown of Athlon Outdoor print operations, as well as lower
digital revenue. The primary driver of the decrease in digital
revenue was a 10.0% decrease in digital advertising revenue due to
the curtailing of certain less profitable brands. Gross profit was
$10.7 million, or 39.3% gross profit margin, compared to gross
profit of $13.2 million, or 38.7% gross profit margin, in the
second quarter last year. The increase in gross profit margin was
driven by a higher mix of revenue from sports partners, which
receive a higher revenue share.
Total operating expenses were $13.3 million compared to $19.6
million for the second quarter last year, a decrease of 32.1%.
Included in this reduction was a 45.7% decrease in selling and
marketing costs and a 25.6% decrease in general and administrative
costs. The decreases were primarily related to decreases in payroll
and employee benefits costs, lower professional marketing services
expenses and a reduction in circulation costs.
For the three months ended June 30, 2024, the net loss from
continuing operations was $6.9 million, a narrowing of $4.6 million
compared to a net loss from continuing operations of $11.5 million
in the comparable quarter last year. Net loss, inclusive of a $1.2
million loss from discontinued operations (net of tax), was $8.2
million, or $0.28 per diluted share, compared to a net loss of
$19.5 million (inclusive of a loss from discontinued operations of
$8.0 million), or $0.88 per diluted share, in the second quarter
last year.
As of June 30, 2024, the Company had cash and cash equivalents
of $6.1 million, compared to $9.3 million as of December 31, 2023.
Total debt as of June 30, 2024 was $123.1 million compared to
$129.8 million as of December 31, 2023, a reduction of $6.7
million.
KPMG Appointed as Independent Auditor
On July 11, 2024, the Board of Directors approved the
appointment of KPMG LLP as The Arena Group’s new independent
registered public accounting firm to perform independent audit
services, effective immediately, replacing Marcum LLP.
About The Arena Group
The Arena Group (NYSE American: AREN) is an innovative
technology platform and media company with a proven cutting-edge
playbook that transforms media brands. Our unified technology
platform empowers creators and publishers with tools to publish and
monetize their content, while also leveraging quality journalism of
anchor brands like TheStreet, Parade, Men’s Journal and Athlon
Sports to build their businesses. The company aggregates content
across a diverse portfolio of over 265 brands, reaching over 100
million users monthly. Visit us at thearenagroup.net and discover
how we are revolutionizing the world of digital media.
Forward Looking Statements
This press release includes statements that constitute
forward-looking statements. Forward-looking statements may be
identified by the use of words such as “forecast,” “guidance,”
“plan,” “estimate,” “will,” “would,” “project,” “maintain,”
“intend,” “expect,” “anticipate,” “prospect,” “strategy,” “future,”
“likely,” “may,” “should,” “believe,” “continue,” “opportunity,”
“potential,” and other similar expressions that predict or indicate
future events or trends or that are not statements of historical
matters, and include, for example, statements related to the
Company’s anticipated future expenses and investments, business
strategy and plans, expectations relating to its industry, market
conditions and market trends and growth, market position and
potential market opportunities, and objectives for future
operations. These forward-looking statements are based on
information available at the time the statements are made and/or
management’s good faith belief as of that time with respect to
future events and are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in
or suggested by the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not
limited to, the ability of the Company to expand its verticals; the
Company’s ability to grow its subscribers; the Company’s ability to
grow its advertising revenue; general economic uncertainty in key
global markets and a worsening of global economic conditions or low
levels of economic growth; the effects of steps that the Company
could take to reduce operating costs; the remaining effects of the
COVID-19 pandemic and impact on the demand for the Company
products; the inability of the Company to sustain profitable sales
growth; circumstances or developments that may make the Company
unable to implement or realize the anticipated benefits, or that
may increase the costs, of its current and planned business
initiatives; and those factors detailed by the Company in its
public filings with the SEC, including its Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q. Should one or more of
these risks, uncertainties, or facts materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by the
forward-looking statements contained herein. Accordingly, you are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date they are made.
Forward-looking statements should not be read as a guarantee of
future performance or results and will not necessarily be accurate
indications of the times at, or by, which such performance or
results will be achieved. Except as required under the federal
securities laws and the rules and regulations of the SEC, we do not
have any intention or obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months
Ended June 30, Six Months Ended June 30,
2024
2023
2024
2023
Revenue
$
27,183
$
34,072
$
56,124
$
62,490
Cost of revenue (includes amortization of developed technology and
platform development for three months ended 2024 and 2023 of $1,507
and $2,323, respectively and for the six months ended 2024 and 2023
of $3,056 and $4,692, respectively)
16,465
20,855
36,473
38,945
Gross profit
10,718
13,217
19,651
23,545
Operating expenses Selling and marketing
3,751
6,904
8,315
12,751
General and administrative
8,632
11,601
18,767
24,576
Depreciation and amortization
913
1,065
1,900
2,161
Loss on impairment of assets
-
-
1,198
119
Total operating expenses
13,296
19,570
30,180
39,607
Loss from operations
(2,578
)
(6,353
)
(10,529
)
(16,062
)
Other (expense) income Change in valuation of contingent
consideration
-
90
(313
)
(409
)
Interest expense, net
(4,249
)
(5,001
)
(8,588
)
(9,183
)
Liquidated damages
(76
)
(177
)
(152
)
(304
)
Total other expense
(4,325
)
(5,088
)
(9,053
)
(9,896
)
Loss before income taxes
(6,903
)
(11,441
)
(19,582
)
(25,958
)
Income tax provision
(35
)
(86
)
(76
)
(93
)
Loss from continuing operations
(6,938
)
(11,527
)
(19,658
)
(26,051
)
Loss from discontinued operations, net of tax
(1,249
)
(7,957
)
(91,887
)
(12,810
)
Net loss
$
(8,187
)
$
(19,484
)
$
(111,545
)
$
(38,861
)
Basic and diluted net loss per common share: Continuing operations
$
(0.24
)
$
(0.52
)
$
(0.70
)
$
(1.27
)
Discontinued operations
(0.04
)
(0.36
)
(3.27
)
(0.62
)
Basic and diluted net loss per common share
$
(0.28
)
$
(0.88
)
$
(3.97
)
$
(1.89
)
Weighted average number of common shares outstanding – basic and
diluted
29,399,365
22,074,500
28,110,331
20,509,676
THE ARENA GROUP HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS June 30, 2024
December 31, 2023 Assets Current assets: Cash and
cash equivalents
$
6,085
$
9,284
Accounts receivables, net
22,698
31,676
Prepayments and other current assets
5,555
5,791
Current assets from discontinued operations
1,014
43,648
Total current assets
35,352
90,399
Property and equipment, net
225
328
Operating lease right-of-use assets
2,565
176
Platform development, net
7,380
8,723
Acquired and other intangible assets, net
24,489
27,457
Other long term assets
773
1,003
Goodwill
42,575
42,575
Noncurrent assets from discontinued operations
-
18,217
Total assets
$
113,359
$
188,878
Liabilities, mezzanine equity and stockholders’ deficiency
Current liabilities: Accounts payable
$
4,977
$
7,803
Accrued expenses and other
27,270
28,903
Line of credit
-
19,609
Unearned revenue
10,719
16,938
Subscription refund liability
131
46
Operating lease liability, current portion
122
358
Contingent consideration
-
1,571
Liquidating damages payable
3,076
2,924
Simplify loan
12,748
-
Bridge notes
8,000
7,887
Debt
102,372
102,309
Current liabilities from discontinued operations
97,516
47,673
Total current liabilities
266,931
236,021
Unearned revenue, net of current portion
530
542
Operating lease liability, net of current portion
2,101
-
Other long-term liabilities
169
406
Deferred tax liabilities
661
599
Noncurrent liabilities from discontinued operations
-
10,137
Total liabilities
270,392
247,705
Mezzanine equity: Series G redeemable and convertible preferred
stock, $0.01 par value, $1,000 per share liquidation value and
1,800 shares designated; aggregate liquidation value: $168; Series
G shares issued and outstanding: 168; common shares issuable upon
conversion: 8,582 at March 31, 2024 and December 31, 2023
168
168
Total mezzanine equity
168
168
Stockholders' deficiency: Common stock, $0.01 par value, authorized
1,000,000,000 shares; issued and outstanding: 29,573,932 and
23,836,706 shares at June 30, 2024 and December 31, 2023,
respectively
295
237
Additional paid-in capital
332,702
319,421
Accumulated deficit
(490,198
)
(378,653
)
Total stockholders’ deficiency
(157,201
)
(58,995
)
Total liabilities, mezzanine equity and stockholders’ deficiency
$
113,359
$
188,878
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version on businesswire.com: https://www.businesswire.com/news/home/20240818869669/en/
Investor Relations Contact Rob Fink, FNK IR
aren@fnkir.com 646.809.4048
The Arena Group Contact Steve Janisse
c-sjanisse@thearenagroup.net 404.574.9206
Arena (AMEX:AREN)
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