Good afternoon, ladies and gentlemen, and welcome to The Arena Group Third Quarter 2021 Earnings Conference and Webcast. At this time, all participants are on a listen-only mode and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Jeff Stanlis with FNK IR. Sir, the floor is yours.

Thank you. Hosting the call today are Ross Levinsohn, Chairman and Chief Executive Officer; and Doug Smith, Chief Financial 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 statements. Forward-looking statements relate to future events or future performance and include without limitation statements concerning the company’s business strategy, future revenues, market growth, capital requirements, product introductions, and expansion plans, and the adequacy of the customer companies funding. Other statements contained in this presentation that are not historical facts are also forward-looking statements. The company cautions investors that any forward-looking statements presented in this presentation or that the company may make orally or in writing from time to time are based on the beliefs of and assumptions made by and the information currently available to the company. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, 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 guarantees of future performance, and some will inevitably prove to be incorrect. As a result, the company’s actual future results can be expected to differ from expectations and those differences may be material. Accordingly, investors should use caution in 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 with the SEC. With that, I’d like to turn the call over to Ross Levinsohn. Ross, congratulations on a great quarter.

Thank you, Jeff. When I was asked to lead this business in September of last year, the executive team, and I set out to transform this company to make it a highly efficient, data-driven, technology powered media company that could scale operations, grow audiences, expand margins, and most importantly, drive sustainable and profitable growth. We have accomplished our initial goals, exceeding our budget, raising forecasts and dramatically expanding our audiences. Some quick highlights before Doug Smith, our CFO takes you through all the numbers. Revenue for the quarter was $59.6 million that’s an 86% increase from Q3 of 2020. The first nine months of the year, revenue grew to $127.9 million that’s up 50% year-over-year. And this number represents as much revenue as we generated in all of 2020 with Q4 historically our most lucrative quarters still to come. Digital advertising revenue grew by 130% year-over-year for the quarter and gross profit for the first nine months of the year was $44 million, up from $9.3 million last year and increase of 373% and distribution revenue or syndication has more than doubled year-over-year. On the audience side, our monthly average unique users in the third quarter of 2021 was $120 million. Average monthly user sessions increased 41% year-over-year and monthly average page views increased 21%. Our monthly average video plays were up 18% and our total social video views for the quarter has grown to over $170 million. And in June, we completed the accretive and strategic acquisition of the sports news company The Spun. Today, The Arena Group is a compelling, rapidly growing tech powered media company, well-positioned as a transformative operator at the center of the media ecosystem. The progress we have made in the last year is evident in the business, financial and operational metrics we delivered…

Thank you, Ross. Let me turn for the results. Third quarter revenue was approximately $59.5 million, up 86% compared to $32.9 million for the third quarter last year. Breaking down our revenue advertising comprised about $21.7 million or 36.4% of total revenue. Our advertising revenue increased by approximately $12 million or 130% as a result of a doubling of advertising sponsorship of the Sports Illustrated Swim business, approximately $5.5 million from the addition of The Spun, which as Ross mentioned, we acquired during the second quarter of 2021, an increase in both revenue per page view and impressions in the Sports Illustrated media business. Magazine circulation revenue increased 102% to $26 million for the third quarter of 2021, reflecting a drive to increase subscribers that we did in the fourth quarter of 2020 and the diminishing effects of acquisition accounting adjustments on the subscribers that existed when we took over the operations of SI Media Group in October of 2019. Other revenue increased 216% to $4.2 million during the third quarter of 2021, driven by the doubling of sponsorship ads revenue related to the SI Swim. Digital subscription revenue was $7.7 million in the third quarter of 2021, down 9% as compared to $8.5 million for the third quarter of 2020. Digital subscription revenue represented about 12.9% of our total revenue in the third quarter of 2021 that compared to 26.4% during the same period last year. For the three months ended September 30, 2021 and 2020, the company recognized cost of revenue of $32.2 million and $24.7 million respectively. The increase in cost of revenue of about $7.5 million is primarily related to first content printing distribution and fulfillment costs increasing by approximately $3.4 million, reflecting the increase in production costs related to the SI Swim issue and sponsorships.…

Thank you, Doug. Well, we’ve come a long way, The Arena Group now has a proven viable business model aligned with current and future media trends. Our sports oriented vertical is growing rapidly and our overall business is producing positive cash flow. We’re a far stronger company today than we were just one year ago today. Q4 is shaping up to be our most profitable in the history of our company. Our audience has expanded exponentially in the quarter already as has revenue. Over the coming months, we’ll be launching several key initiatives that will expand our footprint, diversify our products and opportunity for growth, including commerce, NFTs and the development of an immersive experience in the Metaverse. I want to take this moment to thank all of our employees for working so hard over the past year. I also would like to thank our investors for sticking with us and continuing to invest in our company and for our board for their continued support. With that, I’ll turn it back to the operator for any questions.

Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question is coming from Mark Argento with Lake Street. Your line is live.

Hey, Ross and Doug, congrats on finally get everything up to date. And let’s say you got the business moving in the right direction. So congratulations on that. A couple of quick questions, just in particular talking about you had mentioned already Ross to Q4, we’re shaping up to be a strong quarter, both looks like on revenue and profitability. Any kind of guideposts that you can give us there in terms of how you think about the quarter.

Yes. Well, thanks, Mark. And thanks for supporting and following these years. We’ve had just a gangbuster quarter thus far. We have seen continued growth in our users. We’ve been able to strike a couple of very interesting and highly visible advertising deals and continue to push our subscription business, both digital and print. Without providing very clear guidance, we’re excited about the first six weeks, 5.5 weeks of the quarter, October as Comscore indicated grew again. And I can tell you in the first 14 or so days of the month, we’ve seen our audience expand even further particularly in sports. So I’m optimistic about the rest of the year, obviously, we’ve got a few weeks left in the calendar year and I’ve got – we’ve all got the team focused on running through the finish line. So we’re very optimistic. And mostly Mark, we spent a lot of the past year, ensuring that to use a sports analogy, you’ve got to have a in football, you got to have a great offensive and defensive line in order to make your quarterback and running back and receivers successful. And it was really important for us to get our platform really solid and working, get our – the opportunity for us to expand yield in the advertising business and obviously drive subscriptions with our marketing efforts. So I feel like we’ve gotten our company in a really good place. We’re operating from a position of strength right now and we’re seeing the fruits of that work payoff.

Great. In particular, when you’re – when you guys were looking at this magazine circulation number, it looked like it almost doubled sequentially. Was that specific to the SI Swim or what was driving kind of magazine circulation, like I said, almost doubled, they’re actually doubled on a sequential basis.

Yes. I’ll let Doug hit that. It’s a bit of an accounting question. So Doug, why don’t you grab that?

Yes. So Mark, we did see a nice boost from Swim, but really the newsstand circulation amounts are not really that significant relative to the total subscription base. And what’s driving, this is in the original acquisition, we – acquisition accounting requires us to take a pretty steep discount on the deferred revenue. The subscribers that poured over from the acquired business and as those subscribers diminish as a percentage of our total subscriber base. And they’re replaced by subscribers at pool growth revenue amounts. The revenue amount is naturally increased during the year. So that was a big impact on the total revenue. In addition, as I mentioned in the fourth quarter of last year, we made a strategic shift to drive up the subscriber base to help support our advertising revenue. And so that is flowing through 2021 as well. So it’s a small overall increase in terms of overall performance and a larger amount that is accounting related.

Got it. All right. And then for us just you mentioned looking at a couple other verticals and also some bigger picture stuff, including commerce NFTs and Metaverse. Can you give us a little bit of a flavor and how you’d think about any of those verticals and how you might interim.

Yes. So we’ve spent the better part of the last six months looking at all three commerce NFTs and the Metaverse, having distinctive brands and great IP and assets is the key to all of them. Obviously a growing audience will help in terms of distribution to our own audiences versus having to go out and look for them. We’ve found a couple of great partners that we’re looking at creating strategic relationships with. I expect probably commerce to launch first. In the NFT space, there’s a lot of work and thinking being done there. We’ve been looking at that both in sports, which is owned and controlled by our partners at ABG and trying to work with them. And also on the Metaverse side, creating immersive experiences around sports or financial markets or history, things like that, we think owed very well for us in the future. They’re all nascent businesses, obviously, although some companies have already seen tremendous growth from them. And then on the betting side, our partners at 888 and ABG have real plans to expand and we’ve been building the base of the audience of people who are looking for great content. And clearly, the back end that 888 has through years of work. And they’re very, very big in Europe is tremendous for us and Colorado has already been a great place to launch. So we’ve been doing a lot of work on this, as you may see in the months and years ahead, we take our time with things. This is – we’re very methodical about how we approach new businesses and new markets and we try to vet them out pretty, pretty fully. So we made one acquisition this year in The Spun. We took a lot of time looking for the right one, and we’ve been incredibly pleased with the success that we’ve had there.

Last one for me. Doug, any update in terms of timing on moving to a national exchange. Is there anything that you need to do yet to qualify or is it just more of a waiting game at this point?

No, it’s – there’s nothing that we need to do to qualify. We just need to work through the process and so we’re looking forward to getting this done as quickly as possible as Ross indicated, and hopefully, we’ll wrap this up early in Q1.

Great. Congratulations guys. Thanks.

[Operator Instructions] Your next question is coming from Dan Day with B. Riley. Your line is live.

Yes. Hi afternoon guys. Appreciate taking my questions. Congrats on this is a clearly a really good quarter. So first one for me, I look at The Spun acquisition that you did, it looks super accretive. Can you just talk about from a high level, how you kind of weigh doing an acquisition like that versus just partnering with the content providers and sort of bringing them onto the HubPages platform under sort of that anchor brand? Is it really just a matter of the purchase price being attractive in offers? They’re kind of something more strategic in the way you think about it, like, something that fits well with the anchor brand or something along those lines?

Yes. I think we’ve looked at a lot of businesses over the last year. First and foremost, in looking at The Spun, we were most impressed with their team. Matt Lombardi, who is – was the CEO of the company and his very small team were producing just incredible content and work. And we thought the value of this company was as much in the talent as it was in the property itself. And that’s born out over the first couple of months. Secondly, our Fan Nation business, which is what we like to refer to as entrepreneurial publishers. We have over a 100 of those in sports today. So we are doing both. We’re not just obviously looking at things to buy, but we’re looking at partners we can bring onto our infrastructure, our platform, our technology, our monetization stack that can help third-party businesses. So we’re taking a parallel strategy in that regard. Third, we take the responsibility of the Sports Illustrated brand and what it has stood for all these years really seriously, and not every sports property can be or should be integrated underneath that brand. So we’re offering that solution as part of our platform group, our technology platform group. It doesn’t have to integrate with Sports Illustrated. In this case, we saw a combination of things in The Spun. We saw a business that was performing very well, a great management team. We thought it was a business that when it came on to our platform and our monetization stack. We could grow that business and obviously through the results, you can see revenue has tripled in that time period. But the flip side is we’re looking in our existing brands the same way and one thing to call out in the quarter is SI Swim, which MJ Day, who’s our Editor-In-Chief and Hillary Drezner, who leads our business there really took an aggressive play at SI Swim and pivoted that business to more of a female lifestyle business. We saw revenue double, and we saw impressions go from about $3 billion or $4 billion last year to over $20 billion this year, maybe it’s $5 billion to $20 billion. So not only does the technology and the infrastructure that we’ve set up work for brands on the outside, but it’s also been something our strategy and our methodology has worked for brands internally. So my hats off to the team internally, and obviously The Spun has performed incredibly well as have most of our partners across the more than 175 that we have – that we don’t own, that we help manage and support. So the overarching strategy seems to be working.

Yes. Awesome. Thank you, Ross. And then on the advertising segment, two part question there. So first, can you kind of provide the splits between how much of that advertising is from sort of the magazine circulation versus digital advertising? And then second on the digital advertising, just any commentary on the split between programmatic versus direct sold anything you’ve done to kind of change that mix or any specific target between the two that you’re looking for?

Sure. I’ll take some of it. And Doug, if you want to weigh in. Programmatic is a larger segment than direct sold, print advertising, what we haven’t broken out the number is a smaller piece. The most exciting piece of what we’ve seen over the last nine months of this year has been the increase in yield that we’re seeing from programmatic. We do a fair bit of technological work. We do a fair bit of work on finding the right partners in the Daisy Chain for programmatic. We’ve done I think a really reasonable and strong job in going out and finding programmatic guaranteed partners. So that all of that has been growing for us. The other thing again that we didn’t call out or mention was we signed since we took over the business. We signed the biggest direct ad deal in Q3 that we’ve done since we’ve owned the business. And we’re excited to launch that it’s a multi-year deal many millions of dollars. So our direct team is also going out and signing really strong integrated programs, some cutting across magazine, digital and events. In particular, the swim team did some of that as well. So we are seeing sort of growth across the most importantly, the digital segments, the programmatic segments, and of course, in yield. And Doug, you can feel free to pile on with anything else you’d like to add.

Yes. I think print is just directionally its single-digit percentage of our total revenue – print ad revenue is not a significant portion.

Great. And then last one for me, you’ve obviously got a really strong kind of legacy magazine subscriber base, and you launched sort of the digital Sports Illustrated subscriptions this year. And anything you’re doing in particular to sort of get the people who are sort of magazine only right now into the digital side. And maybe they’re a bit stickier on that side. Just curious anything those efforts and if they’ve yielded any success so far.

Yes, sure. There – we do offer bundles. If you’re a print subscriber we do offer bundles and vice versa. So if you’re a digital subscriber, we’ll also offer you the ability to buy print. Obviously the future of our business is in digital, but the power and the strength of print, it never goes unnoticed. And I’ll give you one anecdote. We – this summer, we put a group called FaZe Clan on the cover of Sports Illustrated, and it – FaZe Clan is a really dynamic gaming company based here in Los Angeles. It has members including LeBron James’ son Bronny, Kyler Murray who’s the quarterback of the Arizona Cardinals and has one of the largest followings I think over 350 million social media followings. And so this is as pure a next generation company, digital company as exists, and the excitement that we got back from their team members, from that company and from the industry as a whole including LeBron showcasing it on a late night talk show calling out the cover, how important the cover of Sports Illustrated is really continues to speak to the power of that cover. We continue to put out the magazine month in and month out just some of the best, I think the best journalism in the industry. So the power of that cover remains really unique in the world. But that said, we’ve been spending time figuring out how to translate that to digital. And over the last year, we launched our digital cover story, which comes out five days a week and tries to replicate the importance of being showcased on the cover. And we create digital covers almost every day. So obviously, the future is there, but I can’t tell you the number of athletes, superstars, executives that I’ve come across in the two years here that that continue to speak to us about the power of the Sports Illustrated brand, how trusted it is and the power of the cover. So we are integrating and we are creating bundles on the subscription side.

Awesome. Ross, Doug, thanks for taking my questions. Best of luck. I’ll turn it over.

Thank you.

We have no further questions from the lines at this time. I would now like to turn the floor back to Ross Levinsohn for closing remarks.

Okay. I want to thank everybody for joining us for our first earnings call. And we couldn’t be more excited about where this company is headed and thank you all for joining and wishing you all a very happy holiday season.

Thank you, ladies and gentlemen. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.