In its first quarterly earnings report since becoming an NYSE American-listed company, The Arena Group chronicled its transformation and growth. The overall audience figures expanded significantly, and the adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) accelerated. Chairman and CEO Ross Levinsohn calls the period leading up to the tech-powered media giant’s IPO “an 18-month journey of transformation.”
The firm includes 40 owned-and-operated properties and partners with more than 200 brands, including Sports Illustrated, TheStreet, and HubPages. It recently acquired multimedia content company AMG/Parade, whose brands include Parade Media, Athlon Sports, Spry Living and Relish, along with Athlon Outdoors. The Company, will add more than 54 million domestic consumers each month in digital and print to The Arena Group. This acquisition will anchor The Arena Group’s new lifestyle vertical and expand its sports vertical.
Levinsohn says, “We are a modern media company built on proprietary technological infrastructure, rapidly expanding audiences, diversified revenue, and significant data assets, all working together to expand margins and generate profits.”
The Arena Group operates a scalable technology platform, monetization stack and subscription infrastructure, and is a prolific content creator and distributor. Its Feb. 9, 2022, public offering raised more than $31 million.
CEO Ross Levinsohn Cites Key Advances
According to Comscore’s audience measurement data, by February of this year, The Arena Group was the 34th largest company in U.S. user share, up from 74th a year ago. Its sports vertical, Sports Illustrated Media Group, has added more than 60 million monthly unique users in one year; it is now No. 4 in the sports category.
“The increases in audiences in the last part of 2021 and early in 2022 foreshadow accelerating revenue growth this year,” Levinsohn says. “We built and expanded our technical platform. We’ve reached an important inflection point, and we will leverage this technology to drive margin expansion. We anticipate moving toward sustainable profitability in 2022.”
Ross Levinsohn has long been a central figure in media, finance, and technology. Before joining The Arena Group, he served as interim CEO of Yahoo and was president of Fox Interactive Media. He also held management roles at HBO, Tribune Publishing, Guggenheim Digital Media, Alta Vista, and CBS Sportsline.
Financial and Operational Insights
Ross Levinsohn was the Sports Illustrated CEO when he became the top executive of then-named Maven in August 2020, rebranding it as The Arena Group and tightening its focus from an abundance of topics to category-specific content. What Levinsohn often refers to as his team’s “playbook” includes hosting and acquiring sites that fit into one of several areas, including sports, finance, and lifestyle verticals.
“When I took over as CEO, we focused our resources, energy, and strategy on using technology to transform media brands,” Ross Levinsohn says. “We invested in technology platforms and the strategic growth of our team, and we designed a playbook for success that today is driving phenomenal user and financial growth.”
Levinsohn explained that while 2022’s first-quarter results reflect a net loss, this is related to expenditures necessary to nurture the company’s growth and one-time and noncash items such as stock-based compensation. The company recorded $68.4 million of noncash charges in 2021, representing 76% of the total net loss of $89.9 million.
“In 2021, we made substantial investments in our technology, people, and one-time costs associated with our audit and legal expenses to bring our filings current and uplist to the NYSE,” Levinsohn explains.
He says such investments were necessary for The Arena Group to grow, but they are in the rearview mirror.
“In Q4 of 2021, our results reflected the groundwork we laid in much of the first three quarters,” Levinsohn says. “The growth we are seeing in Q1 has accelerated thanks to momentum, investments, and execution throughout last year.”
Investment Commentary by Ross Levinsohn
The Arena Group now has a scalable, efficient, and proven platform. Levinsohn expects the continued expansion of the company’s technology platform to drive margin expansion and lead The Arena Group toward sustainable profitability in 2022.
“We retooled our technology stack, including sunsetting our legacy platforms,” he says. “We optimized our partnership economics by eliminating partner guarantees, and we shifted our strategic focus to a vertical model.”
Levinsohn says the company’s competitive edge is in part due to the scalability of its technology, infrastructure, and headcount. He sees no significant architecture or headcount additions necessary to grow substantially.
“Our investments in hardware, software development, and people have positioned us for margin expansion from here forward,” Ross Levinsohn says. “We will not need to spend to grow. In fact, our infrastructure is positioned to ingest partners and new brands, and we are targeting to deliver revenue at gross margins north of 50% going forward.”
Management Highlights of The Arena Group
Since pivoting from Maven to The Arena Group, management has executed its agenda with laser focus to position the company for growth.
“Our playbook brings audience development strategies to the forefront,” Levinsohn says. “It is innovative, and it works.”
Methods include creating what Levinsohn calls “a mutually beneficial flywheel” by using SEO tools to drive traffic to the anchor, Microsoft O&O properties, and partners and publishers.
On Sept. 30, 2021, when colorful stock analyst Jim Cramer left the financial-news site he founded, TheStreet.com, the property felt a slight hiccup and lost some subscribers. But it didn’t last long.
“We rebuilt the funnel by applying The Arena Group playbook to TheStreet,” Levinsohn says.
The site went from 5 million monthly unique users at the time of Jim Cramer’s departure to more than 26 million unique viewers in April 2022, according to ComScore.
“The transformation at TheStreet in such a short period is significant,” Levinsohn says. “And we’re seeing that growth accelerate pretty dramatically in Q1.”
Ross Levinsohn Sees Bright Days Ahead
“We began to see positive adjusted EBITDA of $1.1 million in 2021, and we expect to show a positive adjusted EBITDA during 2022,” Levinsohn says. “The groundwork we’ve laid is solid, and we don’t anticipate adding significantly to our fixed cost base in 2022.”
This year, Levinsohn anticipates deploying the playbook across all properties as the editorial teams help with smooth transitions, including extending a warm welcome to AMG.
“We have repeatedly proven the effectiveness of our model across a wide array of properties,” Levinsohn says. “We crossed the Rubicon in 2021, and I am extremely optimistic about what’s on the other side.”
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