Overall Audience Grows 32% to Nearly 1.5
Billion Pageviews and Advertising Yield (RPM) Grows 10% Year Over
Year
The Arena Group Holdings, Inc. (NYSE American: AREN) (the
“Company” or “The Arena Group”), a tech-powered media company home
to more than 250 brands, including Sports Illustrated, TheStreet,
Inc. (“TheStreet”), Parade Media (“Parade”), and HubPages, Inc.
(“HubPages”) operating on a single technology platform, today
announced financial results for the third quarter of 2022, the
three and nine months ended September 30, 2022.
Third Quarter 2022 And Nine Month Financial and Operational
Highlights
- Total revenue for the third quarter was $66.7 million, the
largest quarterly revenue in Company history and $180.0 million in
revenue for the first nine months, a 41% increase.
- Digital advertising revenue increased 56% in the third quarter
to a record $28.5 million from $18.3 million in the third quarter
of 2021.
- Quarterly gross profit was $26.2 million as compared to $27.4
million in the prior year period, a slight decline due in part to
the absence of both the Summer Olympics and the launch of Sports
Illustrated Swimsuit magazine’s annual edition, both of which
occurred in the third quarter of 2021.
- For the first nine months of 2022, the Company generated $64.3
million in Gross Profit, a 44% improvement year-over-year.
- Quarterly operating expenses decreased by $11.1 million from
$49.8 million to $38.6 million as the Company continued to
efficiently manage expenses.
- Net loss improved by over $8.0 million to $16.5 million as
compared to $24.7 million in the prior year quarter. More than 100%
of the third quarter of 2022 losses were non-cash charges, which
totaled $16.6 million including stock-based compensation,
amortization of platform development and intangible assets and
other non-cash charges.
- Adjusted EBITDA* was $3.0 million for the three months ended
September 30, 2022, a slight decrease as compared to $3.3 million
for the third quarter of 2021. Last year, the Company recognized a
$3.0 million accounting benefit related to print subscriptions and
agency fees. Adjusted EBITDA* for the first nine months improved by
$10.1 million, or 76% to negative $3.1 million.
- The Company continues to diversify revenue as it drives further
growth in licensing and syndication revenue which resulted in 15%
growth to $4.8 million in the current quarter as compared to the
prior year quarter. By leveraging our existing content, this
revenue helps to drive further improvements in our gross
margin.
- The Company continues to expand its partnerships signing 24 new
publishing partners, adding millions of new users, impressions and
revenue and profit at little-to-no incremental cost to the
Company.
*This press release includes reference to non-GAAP financial
measures. Please see the heading “Use of Non-GAAP Financial
Measure” below for a more complete explanation.
Management Commentary
Chairman and Chief Executive Officer of The Arena Group Ross
Levinsohn said, “The record results from The Arena Group reflect
the investments we made over the past 18 months, disciplined and
focused operations, and the continued diversification and expansion
of our core verticals. Our proprietary playbook is driving robust
and sustainable growth across our three core verticals – Sports,
Finance and Lifestyle - enabling us to outpace our competitive set
in both digital advertising revenue and audience growth. The
macroeconomic challenges have impacted our industry across most of
our competitive set, however we have continued to buck the trend
and are optimistic for the remainder of 2022 and beyond.”
The Company generated impactful growth across each vertical in
the third quarter. Highlights include:
- The Sports vertical, anchored by Sports Illustrated and
featuring local team sites brand FanNation, The Spun and Sports
Illustrated Media Group partners, increased monthly average
pageviews by 27% year-over-year, and the Sports Illustrated Media
Group reached the #4 ComScore ranking across sports media in
September.
- In September, The Arena Group acquired The Morning Read, a golf
publisher, to which the Company will apply its playbook to drive
audience and revenue growth. The Morning Read was an existing
publishing partner of the Company.
- The Finance vertical grew monthly average pageviews 209%
year-over-year, reaching an average of 27 million pageviews online
each month, according to Google Analytics. During the third
quarter, TheStreet-branded filming studio opened on the floor of
the New York Stock Exchange.
- The Lifestyle vertical, anchored by Parade, which the Company
acquired in April is already delivering improvements in audience
and yield. Subsequent to the acquisition and integration,
management decided to wind down Parade’s print business,
reallocating resources from print to Parade’s digital business.
According to Google Analytics, Parade.com’s monthly average
pageviews have increased by 18% sequentially from the second
quarter of 2022 and for the first time Parade broke the top 10
ComScore ranking in the Lifestyles category in September.
- In the HubPages business, the Company’s content playbook has
now expanded across 10 sites, with plans to double the number of
sites in 2023. As a result of this strategy, the Company’s total
HubPages monthly average pageviews in Q3 were 88.2 million, up 92%
from the prior year.
“This is a watershed quarter for the company with record
revenue, lower costs, audience and advertising growth with
increasing yield and profitability,” said Ross Levinsohn, Chairman
and CEO, The Arena Group. “We expect our Adjusted EBITDA to be
positive in the fourth quarter and for the full year with expanding
audiences, higher revenue, and operational efficiency. The
investments we made over the past two years have driven our
success, growth, and opportunity for the coming years.”
Mr. Levinsohn concluded, “Our playbook facilitates
cross-promotion, real time coverage and in-depth analysis, and
success in one part of our business drives improvements across the
board. As a key component of this, acquisitions that are integrated
into our platform generate significant growth over historical
levels, while simultaneously expanding profit margins. We proved
this last year with The Spun, and repeated it with Parade and plan
to do so with The Morning Read. The challenging media landscape is
creating significant M&A opportunities for us at compelling
valuations, and we anticipate additional disciplined and accretive
acquisitions to accelerate our growth.”
Financial Results for the Three Months Ended September 30,
2022 Compared to the Three Months Ended September 30, 2021
Revenue was $66.7 million for the third quarter of fiscal 2022,
an increase of 12% compared to $59.6 million in the third quarter
of fiscal 2021. The increase was driven by a 26% increase in total
digital revenue to $38.0 million in the third quarter of 2022,
which included a 56% increase in digital advertising revenue. The
increase in digital advertising revenue was mainly driven by a 32%
increase in monthly average pageviews and a 10% increase in revenue
per pageview with 86% of the total increase driven by organic
growth and the remainder due to the acquisition of Parade Media.
Other digital revenue, primarily licensing and syndication,
increased by $0.6 million, or 15%, despite the fact that the Sports
Illustrated Swimsuit magazine (“SI Swim”) launch added in excess of
$3.0 million of revenue to the third quarter of fiscal 2021 but in
the current year was launched during the second quarter. Total
print revenue decreased by 2% to $28.7 million in the third quarter
of fiscal 2022 from $29.3 million in the third quarter of fiscal
2021, primarily related to a planned decrease in print revenue from
the Sports Illustrated media business as we reduced the rate-base
from 1.7 million to 1.2 million to focus on more profitable
subscriptions. This was largely offset by the addition of the
Athlon publications, which were acquired during the second quarter
of 2022.
Gross profit for the third quarter of 2022 decreased slightly to
$26.2 million from $27.4 million in the prior year period. Cost of
revenue increased by 26% to $40.5 million in the third quarter of
2022 compared to the prior year period, due to higher print and
distribution costs, and editorial, print and distribution costs
related to the acquisition of Parade Media in April 2022. The
Company announced it would be shutting the Parade print business
down as of November 13, 2022, eliminating unprofitable aspects of
the business.
Total operating expenses decreased by more than $11.0 million to
$38.6 million from $49.8 million in the prior year period. The
prior year included a $7.3 million charge related to the
termination of the Company’s New York office lease.
Net loss for the third quarter of 2022 decreased by more than
$8.0 million to $16.5 million as compared to $24.7 million in the
prior year period. The third quarter of 2022 included $16.6 million
of non-cash charges as compared to $24.7 million of non-cash
charges in the third quarter of the prior period.
Adjusted EBITDA for the third quarter of fiscal 2022 decreased
slightly from a positive $3.3 million in the third quarter of 2021
to a positive $3.0 million, primarily related to accounting
benefits in print subscriptions and agency fees that added
approximately $3.0 million to the prior year quarter’s Adjusted
EBITDA.
Adjusted EBITDA is a non-GAAP financial measure. A disclaimer
and reconciliation are provided below.
Financial Results for the Nine Months Ended September 30,
2022 Compared to the Nine Months Ended September 30, 2021
Revenue was $180.0 million for the first nine months of fiscal
2022, representing an increase of 41% compared to $127.9 million in
the first nine months of fiscal 2021. Gross profit was $64.3
million and improved $19.6 million or 44% in the nine months ended
September 30, 2022 as compared to a gross profit of $44.7 million
in the first nine months of the prior year. Gross profit percentage
in the first nine months of 2022 was 36%, as compared to a gross
profit of 35% gross profit percentage in the first nine months of
2021. Total operating expenses were $113.5 million in the first
nine months of 2022 compared to $112.1 million in the first nine
months of 2021.
Net loss narrowed to $57.2 million for the first nine months of
2022 from $70.8 million in the prior year period. The first nine
months of 2022 included $46.6 million of non-cash charges as
compared to $50.0 million of non-cash charges in the first nine
months of 2021.
Adjusted EBITDA for the first nine months of fiscal 2022 was
negative $3.1 million, a $10.1 million or 76% improvement as
compared to negative $13.2 million for the first nine months of
fiscal 2021.
Adjusted EBITDA is a non-GAAP financial measure. A disclaimer
and reconciliation are provided below.
Balance Sheet and Liquidity as of September 30, 2022
Cash and cash equivalents were $13.3 million as of September 30,
2022, compared to $14.8 million as of June 30, 2022 and $9.3
million at December 31, 2021. In the third quarter of 2022, net
cash used in operating activities was $7.2 million, $3.0 million
for tax payments to repurchase restricted common stock, $1.2
million in capitalized platform development expenditures and $0.9
million of net acquisition payments. Partially offsetting these
payments was a $10.7 million for borrowing on our line of
credit.
Conference Call
Ross Levinsohn, The Arena Group’s Chief Executive Officer, and
Doug Smith, The Arena Group’s Chief Financial Officer, will host a
conference call and live webcast to review the quarterly results
and provide a corporate update at 4:30 p.m. ET today. To access the
call, please dial 877-545-0320 (toll free) or 973-528-0002 and if
requested, reference conference ID 567063. The conference call will
also be webcast live on the Investor Relations section of The Arena
Group’s website at
https://investors.thearenagroup.net/news-and-events/events.
Following the conclusion of the live call, a replay of the
webcast will be available on the Investor Relations section of the
Company's website for at least 90 days. A telephonic replay of the
conference call will also be available from 7 p.m. ET on November
9, 2022 until 11:59 p.m. ET on November 23, 2022 by dialing
877-481-4010 (United States) or 919-882-2331 (international) and
using the passcode 46930.
About The Arena Group
The Arena Group creates robust digital destinations that delight
consumers with powerful journalism and news about the things they
love – their favorite sports teams, advice on investing, the inside
scoop on personal finance, and the latest on lifestyle essentials.
With powerful technology, editorial expertise, data management, and
marketing savvy, the transformative company enables brands like
Sports Illustrated, TheStreet and Parade to deliver highly relevant
content and experiences that consumers love. To learn more, visit
www.thearenagroup.net.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with generally
accepted accounting principles in the United States of America
(“GAAP”); however, management believes that certain non-GAAP
financial measures provide users of our financial information with
useful supplemental information that enables a better comparison of
our performance across periods. This press release includes
references to Adjusted EBITDA, which is a non-GAAP financial
measure. We believe Adjusted EBITDA provides visibility to the
underlying continuing operating performance by excluding the impact
of certain items that are noncash in nature or not related to our
core business operations. We calculate Adjusted EBITDA as net loss,
adjusted for (i) interest expense (ii) income taxes, (iii)
depreciation and amortization, (iv) stock-based compensation, (v)
change in derivative valuations, (vi) liquidated damages, (vii)
gain upon debt extinguishment, (viii) loss on lease termination,
(ix) loss on disposition of assets, (x) professional and vendor
fees, and (xi) employee restructuring payments.
Our non-GAAP Adjusted EBITDA may not be comparable to a
similarly titled measure used by other companies, has limitations
as an analytical tool, and should not be considered in isolation,
or as a substitute for analysis of our operating results as
reported under GAAP. Additionally, we do not consider our non-GAAP
Adjusted EBITDA as superior to, or a substitute for, the equivalent
measures calculated and presented in accordance with GAAP.
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 duration and scope of the COVID-19 pandemic and
impact on the demand for the Company products; 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 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 Securities and Exchange Commission (the
“SEC”), including its Annual Report 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
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
September 30, 2022
(unaudited)
December 31, 2021
($ in thousands, except share
data)
Assets
Current assets:
Cash and cash equivalents
$
13,303
$
9,349
Restricted cash
502
502
Accounts receivable, net
33,662
21,660
Subscription acquisition costs, current
portion
22,800
30,162
Royalty fees
-
11,250
Prepayments and other current assets
3,978
4,748
Total current assets
74,245
77,671
Property and equipment, net
793
636
Operating lease right-of-use assets
415
528
Platform development, net
10,339
9,299
Subscription acquisition costs, net of
current portion
7,497
8,235
Acquired and other intangible assets,
net
51,155
57,356
Other long-term assets
564
639
Goodwill
22,554
19,619
Total assets
$
167,562
$
173,983
Liabilities, mezzanine equity and
stockholders’ deficiency
Current liabilities:
Accounts payable
$
11,746
$
11,982
Accrued expenses and other
22,354
24,011
Line of credit
18,474
11,988
Unearned revenue
51,683
54,030
Subscription refund liability
837
3,087
Operating lease liabilities
413
374
Liquidated damages payable
5,836
5,197
Current portion of long-term debt
5,899
5,744
Total current liabilities
117,242
116,413
Unearned revenue, net of current
portion
11,491
15,277
Operating lease liabilities, net of
current portion
471
785
Liquidating damages payable, net of
current portion
-
7,008
Other long-term liabilities
3,771
7,556
Deferred tax liabilities
403
362
Long-term debt
65,433
64,373
Total liabilities
198,811
211,774
Commitments and contingencies
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 September 30, 2022 and December
31, 2021
168
168
Series H convertible preferred stock,
$0.01 par value, $1,000 per share liquidation value and 23,000
shares designated; aggregate liquidation value: $14,556 and
$15,066; Series H shares issued and outstanding: 14,556 and 15,066;
common shares issuable upon conversion: 2,008,728 and 2,075,200 at
September 30, 2022 and December 31, 2021, respectively
13,207
13,718
Total mezzanine equity
13,375
13,886
Stockholders’ deficiency:
Common stock, $0.01 par value, authorized
1,000,000,000 shares; issued and outstanding: 18,149,622 and
12,632,947 shares at September 30, 2022 and December 31, 2021,
respectively
182
126
Common stock to be issued
-
-
Additional paid-in capital
264,568
200,410
Accumulated deficit
(309,374
)
(252,213
)
Total stockholders’ deficiency
(44,624
)
(51,677
)
Total liabilities, mezzanine equity and
stockholders’ deficiency
$
167,562
$
173,983
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
($ in thousands, except share
data)
Revenue
$
66,706
$
59,575
$
180,024
$
127,936
Cost of revenue (includes amortization of
developed technology and platform development for three months
ended 2022 and 2021 of $2,413 and $2,242, respectively and for the
nine months ended 2022 and 2021 of $7,099 and $6,566,
respectively)
40,504
32,215
115,730
83,264
Gross profit
26,202
27,360
64,294
44,672
Operating expenses
Selling and marketing
20,103
22,892
56,626
54,232
General and administrative
13,847
14,557
43,325
37,587
Depreciation and amortization
4,478
4,055
13,124
11,982
Loss on lease termination
-
7,345
-
7,345
Loss on impairment of assets
209
904
466
904
Total operating expenses
38,637
49,753
113,541
112,050
Loss from operations
(12,435
)
(22,393
)
(49,247
)
(67,378
)
Other (expense) income
Change in valuation of warrant derivative
liabilities
-
802
-
497
Interest expense, net
(3,184
)
(2,512
)
(8,510
)
(7,695
)
Liquidated damages
(339
)
(834
)
(639
)
(2,198
)
Gain upon debt extinguishment
-
-
-
5,717
Total other (expense) income
(3,523
)
(2,544
)
(9,149
)
(3,679
)
Loss before income taxes
(15,958
)
(24,937
)
(58,396
)
(71,057
)
Income taxes
(547
)
230
1,235
230
Net loss
$
(16,505
)
$
(24,707
)
$
(57,161
)
$
(70,827
)
Basic and diluted net loss per common
share
$
(0.90
)
$
(2.15
)
$
(3.30
)
$
(6.38
)
Weighted average number of common shares
outstanding – basic and diluted
18,284,670
11,491,412
17,339,882
11,100,416
THE ARENA GROUP HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Nine Months Ended September
30,
2022
2021
($ in thousands)
Cash flows from operating
activities
Net loss
$
(57,161
)
$
(70,827
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of property and equipment
395
334
Amortization of platform development and
intangible assets
19,828
18,214
Gain upon debt extinguishment
-
(5,717
)
Loss on termination of lease
-
7,345
Amortization of debt discounts
1,215
1,534
Loss on impairments of assets
466
904
Change in valuation of warrant derivative
liabilities
-
(497
)
Noncash and accrued interest
86
5,273
Liquidated damages
639
2,198
Stock-based compensation
24,777
21,689
Deferred income taxes
(1,235
)
(230
)
Other
468
(1,060
)
Change in operating assets and liabilities
net of effect of business combination:
Accounts receivable
(1,385
)
(173
)
Subscription acquisition costs
8,100
(8,434
)
Royalty fees
11,250
11,250
Prepayments and other current assets
2,107
(78
)
Other long-term assets
75
639
Accounts payable
(7,652
)
1,215
Accrued expenses and other
(3,390
)
5,566
Unearned revenue
(7,382
)
5,389
Subscription refund liability
(2,250
)
344
Operating lease liabilities
(162
)
(2,448
)
Other long-term liabilities
(3,465
)
(692
)
Net cash used in operating activities
(14,676
)
(8,262
)
Cash flows from investing
activities
Purchases of property and equipment
(444
)
(300
)
Capitalized platform development
(3,990
)
(3,017
)
Proceeds from sale of equity
investment
2,450
-
Payments for acquisition of business, net
of cash acquired
(10,331
)
(7,357
)
Net cash used in investing activities
(12,315
)
(10,674
)
Cash flows from financing
activities
Borrowings (repayments) under line of
credit
6,486
(473
)
Proceeds from common stock public
offering, net of offering costs
32,058
-
Payments of issuance costs from common
stock public offering
(1,568
)
-
Net exercise of common stock options
94
-
Payment of The Spun deferred cash
payment
(453
)
-
Proceeds from common stock private
placement
-
20,005
Payments of issuance costs from common
stock private placement
-
(167
)
Payment for taxes related to repurchase of
restricted common stock
(3,520
)
(70
)
Payment of restricted stock
liabilities
(2,152
)
(1,165
)
Net cash provided by financing
activities
30,945
18,130
Net increase (decrease) in cash, cash
equivalents, and restricted cash
3,954
(806
)
Cash, cash equivalents, and restricted
cash – beginning of period
9,851
9,535
Cash, cash equivalents, and restricted
cash – end of period
$
13,805
$
8,729
Cash, cash equivalents, and restricted
cash
Cash and cash equivalents
$
13,303
$
8,228
Restricted cash
502
501
Total cash, cash equivalents, and
restricted cash
$
13,805
$
8,729
Supplemental disclosure of cash flow
information
Cash paid for interest
$
7,209
$
902
Cash paid for income taxes
-
-
Noncash investing and financing
activities
Reclassification of stock-based
compensation to platform development
$
1,529
$
1,347
Restricted stock issued in connection with
acquisition of Fulltime Fantasy
-
503
Deferred cash payments in connection with
acquisition of Fulltime Fantasy
-
419
Issuance of common stock in connection
with settlement of liquidated damages
7,008
-
Issuance of common stock in connection
with professional services
-
125
Common stock issued in connection with
acquisition of Athlon
3,141
-
Deferred cash payments in connection with
acquisition of Athlon
949
-
Assumption of liabilities in connection
with acquisition of Athlon
11,602
-
Deferred cash payments in connection with
acquisition of The Spun
-
905
Assumption of liabilities in connection
with acquisition of The Spun
-
2
Conversion of Series H convertible
preferred stock into common stock
511
-
THE ARENA GROUP HOLDINGS, INC. AND
SUBSIDIARIES NET LOSS TO ADJUSTED EBITDA RECONCILIATION
(unaudited)
The following table presents a reconciliation of Adjusted EBITDA
to net loss, which is the most directly comparable GAAP measure,
for the periods indicated:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net loss
$
(16,505
)
$
(24,707
)
$
(57,161
)
$
(70,827
)
Add:
Interest expense (1)
3,184
2,512
8,510
7,695
Deferred income taxes
547
(230
)
(1,235
)
(230
)
Depreciation and amortization (2)
6,891
6,297
20,223
18,548
Stock-based compensation (3)
8,311
8,475
24,777
21,689
Change in derivative valuations
-
(802
)
-
(497
)
Liquidated damages (4)
339
834
639
2,198
Gain upon debt extinguishment (5)
-
-
-
(5,717
)
Loss on lease termination (6)
-
7,345
-
7,345
Loss on impairment of assets (7)
209
904
466
904
Professional and vendor fees (8)
-
2,124
-
5,152
Employee restructuring payments (9)
-
513
679
580
Adjusted EBITDA
$
2,976
$
3,265
$
(3,102
)
$
(13,160
)
(1)
Represents interest expense (net of
interest income) of $3,184 and $2,512, for the three months ended
September 30, 2022 and 2021, respectively, and interest expense
(net of interest income) of $8,510 and $7,695, for the nine months
ended September 30, 2022 and 2021, respectively. Interest expense
is related to our capital structure. Interest expense varies over
time due to a variety of financing transactions. Interest expense
includes $281 and $533 for amortization of debt discounts for the
three months ended September 30, 2022 and 2021, respectively, and
$1,215 and $1,534 for amortization of debt discounts for the nine
months ended September 30, 2022 and 2021, as presented in our
condensed consolidated statements of cash flows, which are a
noncash item. Investors should note that interest expense will
recur in future periods.
(2)
Represents depreciation and amortization
related to our developed technology and Platform included within
cost of revenues of $2,413 and $2,242, for the three months ended
September 30, 2022 and 2021, respectively, and depreciation and
amortization included within operating expenses of $4,478 and
$4,055 for the three months ended September 30, 2022 and 2021,
respectively. Represents depreciation and amortization related to
our developed technology and Platform included within cost of
revenues of $7,099 and $6,566, for the nine months ended September
30, 2022 and 2021, respectively, and depreciation and amortization
included within operating expenses of $13,124 and $11,982 for the
nine months ended September 30, 2022 and 2021, respectively. We
believe (i) the amount of depreciation and amortization expense in
any specific period may not directly correlate to the underlying
performance of our business operations and (ii) such expenses can
vary significantly between periods as a result of new acquisitions
and full amortization of previously acquired tangible and
intangible assets. Investors should note that the use of tangible
and intangible assets contributed to revenue in the periods
presented and will contribute to future revenue generation and
should also note that such expense will recur in future
periods.
(3)
Represents noncash costs arising from the
grant of stock-based awards to employees, consultants and
directors. We believe that excluding the effect of stock-based
compensation from Adjusted EBITDA assists management and investors
in making period-to-period comparisons in our operating performance
because (i) the amount of such expenses in any specific period may
not directly correlate to the underlying performance of our
business operations, and (ii) such expenses can vary significantly
between periods as a result of the timing of grants of new
stock-based awards, including grants in connection with
acquisitions. Additionally, we believe that excluding stock-based
compensation from Adjusted EBITDA assists management and investors
in making meaningful comparisons between our operating performance
and the operating performance of other companies that may use
different forms of employee compensation or different valuation
methodologies for their stock-based compensation. Investors should
note that stock-based compensation is a key incentive offered to
employees whose efforts contributed to the operating results in the
periods presented and are expected to contribute to operating
results in future periods. Investors should also note that such
expenses will recur in the future.
(4)
Represents damages (or interest expense
related to accrued liquidated damages) we owe to certain of our
investors in private placements offerings conducted in fiscal years
2018 through 2020, pursuant to which we agreed to certain covenants
in the respective securities purchase agreements and registration
rights agreements, including the filing of resale registration
statements and becoming current in our reporting obligations, which
we were not able to timely meet.
(5)
Represents a gain upon extinguishment of
the Paycheck Protection Program Loan.
(6)
Represents our loss related to the
surrender and termination of our lease of office space located in
New York based on our decision to no longer lease office space.
(7)
Represents our impairment of certain
assets that no longer are useful.
(8)
Represents one-time, non-recurring third
party professional and vendor fees recorded in connection with
services provided by consultants, accountants, lawyers, and other
vendors (these fees are collectively referred to as “Professional
Fees”) related to (i) the preparation of periodic reports in order
for us to become current on our Exchange Act reporting obligations,
(ii) up-list to a national exchange, (iii) contemplated and
completed acquisitions, (iv) public and private offerings of our
securities and other financings, and (v) stockholder disputes and
the implementation of our Rights Agreement.
The table below summarizes the costs
defined above that we incurred during fiscal 2021:
Three Months Ended
Nine Months Ended
September 30,
September 30,
Category
2022
2021
2022
2021
(i) Catch-up periodic reports
$
-
$
1,654
$
-
$
3,795
(ii) Up-list
-
61
-
93
(iii) M&A
-
89
-
338
(iv) Public & private offerings and other financings
-
120
-
388
(v) Stockholder disputes/Rights Agreement
-
200
-
538
Totals
$
-
$
2,124
$
-
$
5,152
We incurred the majority of the
Professional Fees during the three and nine months ended September
30, 2021 for preparation of our Exchange Act periodic reports, and
because these costs were incurred for multiple reporting periods
over several years simultaneously, the invoices received from our
vendors itemized the services that each vendor provided for each
respective reporting obligation (i.e., a quarterly or annual audit
by year). As such, we were able to reasonably estimate the cost of
a normal year’s compliance with Exchange Act reporting requirements
related to periodic reports. Therefore, we did not adjust for (or
add back) such normal year’s fees in calculating Adjusted EBITDA.
Management believes that these Professional Fees represent
non-recurring, infrequent and unusual expenses and does not expect
to incur such expenses in the future.
(9)
Represents severance payments to the
former Chief Financial Officer of Athlon and our former Chief
Executive Officer for the three and nine months ended September 30,
2022 and 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006311/en/
Investor Relations Contact Rob Fink FNK IR Aren@fnkir.com
646.809.4048
Media Contacts: Rachael Fink Communications Manager, The
Arena Group Rachael.fink@thearenagroup.net
Andrew Rhodes DKC arena@dkcnews.com
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