AREN - AMEX

Good afternoon, ladies and gentlemen. Thank you for joining us today. Welcome to The Arena Group Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. I would now like to turn the conference over to Morgan Fitzgerald, Investor Relations, Social Media. Ms. Fitzgerald, you may begin the conference. Thank you.

Hosting the call today are Paul Edmondson, Chief Executive Officer, and Geoffrey Wait, Principal Financial Officer. Before we begin, I would like to note that some of the comments made during this call 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 company's funding. The company cautions investors that any forward-looking statements made in this call, or that the company may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and 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. 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. The company disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. In addition, reference will be made to the non-GAAP financial measure, adjusted EBITDA. Information regarding reconciliation of this non-GAAP measure to the closest GAAP measure can be found in the press release that was issued this afternoon and can also be found on our Investor Relations website at investors.thearenagroup.net. With that, I would like to turn the call over to CEO, Paul Edmondson. Paul, the call is yours.

Thank you for joining us today to discuss our results from the fourth quarter and full fiscal year 2025. We are proud to report our 2025 results with $286,000,000 of income from continuing operations. We reduced our debt by $23,500,000 while our cash balance grew nearly $6,000,000 to $10,300,000. Before we get into the details, I want to highlight the broader industry dynamics that have shaped the digital publishing landscape. The recent search algorithm updates have introduced fluctuations in traffic patterns across the digital media industry, impacting not only The Arena Group Holdings, Inc., but virtually all major publishers. We view these changes favorably as a catalyst for innovation and growth. We believe our team has responded with agility and determination, implementing robust strategies to optimize our content for the evolving landscape while simultaneously accelerating our efforts to diversify revenue streams. We are actively expanding our direct audience engagement, strengthening partnerships, and investing in alternative channels that are less reliant on algorithmically driven traffic. These initiatives are already yielding positive momentum, and we expect them to drive sustainable growth going forward. We are more confident than ever in our ability to outperform the market. Our disciplined operational model, ongoing cost optimization, and strategic investments in technology and product have positioned us to capitalize on emerging opportunities. We believe our diversified business model not only mitigates risk, but also sets the stage for long-term value creation. As the industry evolves, The Arena Group Holdings, Inc. stands ready to lead, innovate, and deliver exceptional results for our shareholders. Now, Geoffrey Wait, our Principal Financial Officer, will walk you through our financial results from Q4 and the 2025 fiscal year.

Thanks, Paul, and good afternoon, everyone. Revenue was $28,200,000 in 2025 compared to $36,200,000 in 2024. Q4 2025 revenue was impacted by extensive user experience testing impacting ads and the ongoing traffic fluctuations. Our net income this quarter was $5,300,000, or 18.8% of revenue, compared to $6,900,000, or 19.1% of revenue, in the same period a year ago. Adjusted EBITDA was $10,100,000, or 35.8% of revenue, virtually unchanged from the EBITDA margin in Q4 2024. Our excellent margin retention reflects the efficiency of our entrepreneurial publishing model and variable cost structure and our ability to drive profit across a variety of traffic scenarios. This profit performance enabled us to generate $13,100,000 of cash from operating activities and accelerate momentum on our debt reduction initiatives through a $13,000,000 repayment of our term loan made in 2025. Overall, 2025 proved to be transformation in terms of our operations and results. Full-year revenue for fiscal 2025 was $134,800,000 compared to $125,900,000 in 2024. Non-advertising revenue increased more than $21,000,000 over 2024 as a result of our continued focus on reducing our reliance on external traffic referral sources. Advertising revenue represented just 64% of our total revenue in 2025 compared to 74% in 2024. Additionally, income from continuing operations was $28,600,000 for the year, up from a loss of $7,700,000 in FY 2024, and net income was $124,900,000 in 2025, including income from discontinued operations of $96,300,000. This is compared to a loss of $100,700,000 in 2024, including a loss from discontinued operations of $93,000,000. Adjusted EBITDA improved to $51,500,000, or 38.2% of revenue, in 2025 compared to $27,000,000, or 21.4% of revenue, in 2024. These results reflect the successful execution of our strategic initiatives to diversify revenue and optimize costs. By scaling our entrepreneurial publishing model and emphasizing high-margin non-advertising revenue streams, we have fundamentally reshaped our profitability profile. We believe this transformation demonstrates our ability to adapt to industry changes and positions us for continued financial strength and resilience. I would also like to highlight the continued improvements on our balance sheet. Debt reduction was a key focus throughout 2025, and we repaid $23,500,000 in principal between our revolver and term loan, and we also increased our cash balance by $6,000,000 to $10,300,000. Despite the industry fluctuations, we remain confident in our ability to generate positive cash flow in 2026. With that, I will turn the call back over to Paul to discuss our operations in more detail.

Thanks, Jeff. One key detail to note is our continued evolution, not only as a publisher, but in our broader identity. We are no longer just a publishing company. We are a brand, data, and IP company. With the addition of ShopHQ's first-party customer data, combined with the considerable reach of the brands, like Parade on the Street, we are creating a closed-loop ecosystem. We can identify high-intent audiences and serve them products directly with our content. We are using data signals from our audiences across our network to inform the types of products we offer on ShopHQ, so it is truly a flywheel to convert our readers to shoppers. ShopHQ has been a vital piece of the content-to-commerce puzzle. Additionally, following the October acquisition of Linde Sports, the digital platform was successfully relaunched, contributing to a broader sports ecosystem and immediate gains in high-intent sports betting and preview content. Not only do we have intentional content across our various properties, but the launch of Encore has united first-party data across all 40-plus brands, connecting user behavior directly to commerce outcomes and providing advertisers with high-conversion, brand-safe inventory. Looking forward to 2026, we remain focused on diversifying our revenue, paying down debt, and maintaining a disciplined approach to capital management, including M&A, in order to remain profitable and continue our growth trajectory throughout the year and thereafter. We truly believe the future is bright for The Arena Group Holdings, Inc., and are excited to continue our growth story. With that, I will turn the call back to the operator for Q&A. Thank you.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Ryan Myers with Lake Street Capital. Please proceed with your question.

Hey, guys. Thanks for taking my questions. First one for me here, I know it is difficult to predict, just given some of the traffic volatility that you have seen. But can you maybe talk about what you have seen so far here in the '6? And then how you guys are thinking about that through the rest of this year, and maybe how we should be thinking about that as well?

Hey, Ryan. This is Paul. Thanks for the question there. Yes. So traffic and those various sources of algorithmic audience have been more volatile. There have been more what we call core updates, or however they get announced online through the various sources. We have seen a real mix. Some of the properties are doing really well. Other ones are seeing some more of the volatility that comes with it. We feel like right now, the base level in Q1 is going to be fairly—we feel like that is our base for how we are thinking about the business going forward. It is always hard to predict exactly what is going to happen, but we do really focus on what we control. We run a lot of continued tests, focus on the monetization, and really have kept a lean cost structure so we can adapt to pretty much any environment as it comes.

Okay. Got it. And then that sort of leads me into my next question. Obviously, nice to see the margins hold up despite where the revenue is coming in at. But how should we think about where you expect the margins to trend here in 2026 as you invest in some of these other non-advertising revenue line items? Does that change the margin structure at all? Any commentary on how you are thinking about that in '26 would be helpful.

Hi, Ryan. This is Jeff. Thanks for that question. So as we think about moving into 2026 and beyond, as I mentioned in the call, we have reduced our reliance on advertising revenues from 74% down to 64%. Our intention in 2026 is to continue driving that number down, and we would like to get it below 50%. As we do that, I do expect some favorable impact to our margin. But also, as our ShopHQ business grows, being a commercial business where we provide inventory, that has a little bit of a different margin profile as well. So overall, I expect those two factors to offset a little bit and intend to deliver a similar margin profile to what we have seen in 2025.

Okay. Great. Thanks for taking my questions, guys.

Thank you. Our next question comes from the line of Jonathan Old with Longmeadow Investors. Please proceed with your question.

Thanks, gentlemen. Appreciate the call. I am curious if you are still seeing maybe an acquisition or two a quarter. Does that cadence still hold, or are the internal dynamics that you are focused on taking priority?

Thanks, Jonathan. That is another good question. As we think about capital allocation as we continue into 2026, in 2025, we made a lot of progress on the debt and paying down the debt. In 2026, we want to focus on accelerating the growth of the company. So in order to do that, I do anticipate we will continue at a one to two tuck-in media acquisition per quarter cadence as we have in the past. But we are also interested in exploring other opportunities as well that will especially speed up the changes I have talked about in moving from an advertising revenue-only business to an ad revenue supported by other revenue streams business.

Okay. And I assume you are still under the debt structure. Stock buybacks are on the back burner until you get—maybe you can update us on where a refinancing might stand.

Yes, it is a great question. This all ties together into our general approach to capital allocation. We announced our share repurchase program in July, and we have not yet completed any share repurchases. In advance of completing a debt refinance, we believe the most prudent use of our capital has been to do value-add M&A as well as to reduce our debt profile, and that is what you saw us do throughout 2025. We do see asset prices in our sector at favorable levels where we believe we can do value-accretive M&A that generates significant long-term returns for the company and for our shareholders. We want to maintain some dry powder and balance sheet flexibility to act on those opportunities as they come up in the market. So a share repurchase remains an important tool in our toolbox, but I do think there are a few other things that we want to prioritize first.

Got it. What is your expectation, if you have any, on the timing of the refinancing, or do you have no rush at this point?

We continue to— in 2025, we made a great deal of progress solidifying our financial position. We grew earnings; we reduced our leverage. Based on our full-year numbers, we are below two times. This gives us a pretty good level of confidence that we are refinanceable in the current market. We have had several productive conversations over the last few months, but we are being intentionally disciplined. We do not want to close the first deal that comes to us; we want to secure the right deal. Specifically, we are looking for a solution that gives us long-term operational flexibility, and we are focused on quality and fit over speed. I do not have a specific timeline to share right now, but we will continue to provide further updates as we move towards the definitive agreement that aligns with our strategic goals.

Great. Thanks very much. I appreciate the color.

Thank you. With that, ladies and gentlemen, that does conclude our question-and-answer session. I would now like to turn the floor back over to Paul Edmondson for closing remarks.

Thank you. Thank you, everybody, for joining our call today. We appreciate everybody tuning in, and we look forward to giving updates for the full 2026 and to a good, strong year. Thank you.