The Arena Group Holdings, Inc., a technology platform and media company home to more than 320 brands, including Sports Illustrated, TheStreet, Parade Media (“Parade”), Men’s Journal, and HubPages, has released financial results for the three and nine period months ended Sept. 30, 2023. The company once again generated year-over-year revenue growth (up 11%), expanded its gross margins (up approximately 1.5%), lowered operating expenses (down 4%), and improved profitability metrics. In addition, adjusted EBITDA improved by $2.9 million or 86%, compared to the previous year's quarter.
Additionally, subsequent to the end of the third quarter, on Nov. 6, 2023, The Arena Group signed a definitive agreement to combine with Bridge Media Networks.. The transaction will expand The Arena Group’s video capabilities in digital streaming, OTT, OTA, CTV, and Free Ad Supported Television (FAST) channels and expand the company’s content in the travel and automotive categories.
In connection with the business combination, 5-Hour International Corporation Pte. Ltd. will purchase $25 million of common stock of the combined company and The Hans Foundation, USA will purchase $25 million of preferred stock of the combined company. The parent company of Bridge Media, Simplify Inventions, LLC (“Simplify”), has also agreed to purchase up to $20 million of additional common equity in the combined company for a period of one year following the closing date of the business combination to be used for operations and growth.
The combined company will receive a five-year guaranteed advertising commitment of approximately $60 million aggregate value from a group of consumer brands also owned by Simplify, including 5-hour ENERGY. The Arena Group intends to use a portion of the cash proceeds to reduce its debt by $26 million from current levels.
“This proposed combination is expected to significantly accelerate our video opportunities across all digital and terrestrial platforms, a key component of our strategy, "The Arena Group Chairman and CEO Ross Levinsohn said. "We expect the combination will expand our content base into two new verticals, travel and automotive, bolstering our business model. We have targeted these two topics for verticals for some time, and this acquisition will provide the brand assets to accelerate the launch."
The transaction is expected to close in the fourth quarter of 2023 or first quarter of 2024 subject to the approval of the company’s stockholders, the receipt of any required regulatory approvals, and certain other closing conditions.
The Arena Group grew revenue, digital segment
“Our third quarter results reflect strong and focused execution amidst a continued challenging environment. We grew revenue by 11%, expanded our gross margins, reduced operating expenses, narrowed net loss by $5.3 million or 32%, and improved adjusted EBITDA by $2.9 million or 86%," Levinsohn shared. "This progress, despite industry-wide headwinds in the advertising ecosystem and shifting audiences, demonstrates the earnings power of our differentiated business model, enabling us to grow more efficiently and drive engagement.”
Image source: TheStreet.
These are The Arena Groups third quarter 2023 financial and operational highlights:
- Revenue increased 11% to $63.4 million compared to $57.3 million in the prior year quarter.
- Total digital revenue increased nearly 21% to $45.8 million, representing 72% of total revenue (up from 66% of total revenue in Q3 2022). Digital advertising revenue increased by nearly 29% to $36.7 million due to a 46% rise in revenue-per-pageview.
- Licensing and syndication revenue was $4.5 million, an increase of 2% as compared to the prior year quarter.
- Gross profit increased by nearly 15% to $28.2 million, representing a gross margin improvement of approximately 1.5% to 44%, reflecting the company’s tight focus on cost control while growing revenue.
- Total operating expenses decreased by $1.4 million or 4% to $35 million.
- Net loss narrowed by $5.3 million, or 32%, to $11.2 million from $16.5 million in the prior year period.
- Q3 2023 included approximately $12.4 million in non-cash charges, including stock-based compensation, amortization of platform development and intangible assets, and other non-cash charges.
- Adjusted EBITDA improved from $3.4 million in Q3 2022 to $6.4 million in Q3 2023, an improvement of $2.9 million or 86%.
The Arena Group verticals continue to grow
The Sports vertical, anchored by Sports Illustrated, for the first time reached the #2 spot in the Comscore sports properties rankings this quarter, a milestone achievement for the brand.
Athlon Sports and team sites brand FanNation both delivered strong traffic growth, with pageviews increasing by 116% and 48% respectively as compared to the prior year quarter, according to Google Analytics. Sports Illustrated is resonating with audiences on social media as well, with over 600,000 new followers during the quarter.
The Finance vertical, anchored by TheStreet, had a record quarter with nearly 40 million monthly average pageviews, according to Google Analytics, an increase of 40% as compared to the prior year quarter. TheStreet continues to distribute original video content from the floor of the New York Stock Exchange across multiple channels, syndication platforms, and platforms.
The Lifestyle vertical, anchored by Parade and Men’s Journal, added new publishing partners during the quarter, with Parade partnering with National Day Calendar on daily themed content, and new partnerships with Men’s Journal ranging in topics from Mountaineering to Cycling to Adventure Travel.
In September, The Arena Group launched its Creator Network, a creator-led cultural content hub, backed by its iconic brands for social branded opportunities. The company has engaged with several new advertiser/creator partnerships, one of which resulted in Sports Illustrated’s highest-viewed original content series ever, with 40 million views across Instagram and TikTok.
