Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

The Arena Group Reports Record Revenue and Positive Net Cash Generated from Operating Activities in the Second Quarter of 2022; Total Revenue Increases 87%, As Digital Ad Revenue Grows 114% 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 240 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 second quarter of 2022, the three and six months ended June 30, 2022.

Second Quarter 2022 Financial and Operational Highlights

*This press release includes reference to non-GAAP financial measures. Please see the heading "Use of Non-GAAP Financial Measures" below for a more complete explanation.

Management Commentary

Chairman and Chief Executive Officer of The Arena Group Ross Levinsohn said, "The Arena Group continues to deliver robust revenue growth and improvements to the bottom line. Growth was achieved across our three core verticals ? Sports, Finance and Lifestyle. We have outpaced our competitive set in both digital advertising revenue and audience growth. Our playbook and improved performance drove a 114% year-over-year increase in digital advertising revenue, as our properties increasingly reach coveted consumers at scale and our overall audience expanded by 82% year-over-year, according to Google Analytics."

The Company generated impactful growth across all key KPIs within each vertical in the second quarter. Highlights include:

"Our highly efficient platform and proven ability to produce relevant content that engages consumers has enabled us to successfully navigate the well-publicized industry-wide challenges in advertising related to a slowing economy," added Mr. Levinsohn. "The continued growth in partners, traffic, data and impressions allows us to provide attractive returns for advertisers."

"Digital revenues and audience are growing rapidly, and second quarter core KPIs are all seeing significant growth versus the same period last year ? digital ad revenue is up 114%; monthly average pageviews are up 82%; social video views are up 71%; display CPMs are up 41% excluding Parade," added Mr. Levinsohn. "The digital integration of Parade has gone exceedingly well, with rapid improvements in efficiency and digital margins. We expect to see the full benefit of this integration and the inherent value of our innovative playbook in the second half of 2022. However, during the second quarter, we experienced pressure on the print business due to inflation and supply chain factors. We are optimizing our business for Parade just as we did for Sports Illustrated when we took over operations, ensuring that our print business will be cash flow positive."

Recent Business Highlights

Financial Results for the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

Revenue was $65.1 million for the second quarter of fiscal 2022, an increase of 87% compared to $34.7 million in the second quarter of fiscal 2021. The increase was driven by a 75% increase in total digital revenue to $35.1 million in the second quarter of 2022, which included a $13.2 million, or 114%, increase in digital advertising revenue. 84% of the digital advertising growth was organic, driven by significantly higher traffic across all of properties in the second quarter of fiscal 2022 as compared to the prior year, and a greater contribution of digital direct ad impressions. Total print revenue increased 105% to $30.0 million in the second quarter of fiscal 2022 from $14.7 million in the second quarter of fiscal 2021, driven by the acquisition of Athlon Media Group, including Parade Media, in April 2022.

Gross profit increased 94% to $18.3 million, compared to a gross profit of $9.4 million in the prior-year quarter. Cost of revenue increased by 85%, due to the acquisition of Athlon Media Group/Parade and costs related to the SI Swim magazine, which was launched in the second quarter of 2022, but was launched in the third quarter of 2021. The increase in cost of revenue also reflects the full year effect of investments we made in audience development and data analytics personnel in the second half of 2021, which have been key in driving traffic and digital advertising growth.

Total operating expenses were $39.7 million in the second quarter of 2022 compared to $32.7 million in the second quarter of 2021. The increase was primarily driven by the addition of the Athlon Media Group/Parade business.

Net loss increased to $22.2 million for the second quarter of 2022 as compared to $20.7 million in the prior year period. The second quarter of 2022 included $14.9 million of non-cash charges as compared to $11.1 million of non-cash charges in the second quarter of the prior year.

Adjusted EBITDA* for the second quarter of fiscal 2022 improved 32% to negative $4.9 million, compared to a loss of $7.2 million for the second quarter of fiscal 2021, representing a $2.3 million improvement.

*Adjusted EBITDA is a non-GAAP financial measure. A disclaimer and reconciliation are provided below.

Financial Results for the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Revenue was $113.3 million for the first six months of fiscal 2022, an increase of 66% compared to $68.4 million in the first six months of fiscal 2021. Gross profit was $38.1 million in the first six months of 2022, representing a 34% gross profit percentage as compared to a gross profit of $17.3 million, representing a 25% gross profit in the first six months of 2021. Total operating expenses were $74.9 million in the first six months of 2022 compared to $62.3 million in the first six months of 2021.

Net loss narrowed to $40.7 million for the first six months of 2022 as compared to $46.1 million in the prior year period. The first six months of 2022 included $30.0 million of non-cash charges as compared to $25.3 million of non-cash charges in the first six months last year. Adjusted EBITDA* for the first six months of fiscal 2022 was negative $6.1 million, compared to negative $17.2 million for the first six months of fiscal 2021, a 65% improvement.

*Adjusted EBITDA is a non-GAAP financial measure. A disclaimer and reconciliation are provided below.

Balance Sheet and Liquidity as of June 30, 2022

Cash and cash equivalents were $14.8 million at June 30, 2022, compared to $22.5 million at March 31, 2022. In the quarter, net cash generated from operating activities was $5.8 million, which was offset by $9.9 million of net acquisition payments, $1.5 million of capital expenditures and a $1.5 million paydown of our line of credit.

Conference Call

Ross Levinsohn, The Arena Group's Chief Executive Officer and Doug Smith, Chief Financial Officer, will host a conference call and live webcast to review the quarterly results and provide a corporate update on Tuesday, August 9, 2022 at 4:30 p.m. ET. To access the call, please dial 833-492-0063 (toll free) or 973-528-0011 and if requested, reference conference ID 658565. 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 August 9, 2022 until 11:59 p.m. ET on August 23, 2022 by dialing 877-481-4010 (United States) or 919-882-2331 (international) and using the passcode 46229.

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.

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 expected effects on the Company's business from the COVID-19 pandemic. 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 Arena Group Holdings, Inc. in its public filings with the Securities and Exchange Commission, 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 Securities and Exchange Commission, 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

 

 

 

June 30, 2022
(unaudited)

 

December 31, 2021

 

 

($ in thousands, except share data)

Assets

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,839

 

 

$

9,349

 

Restricted cash

 

 

502

 

 

 

502

 

Accounts receivable, net

 

 

34,450

 

 

 

21,660

 

Subscription acquisition costs, current portion

 

 

28,603

 

 

 

30,162

 

Royalty fees

 

 

3,750

 

 

 

11,250

 

Prepayments and other current assets

 

 

4,863

 

 

 

4,748

 

Total current assets

 

 

87,007

 

 

 

77,671

 

Property and equipment, net

 

 

832

 

 

 

636

 

Operating lease right-of-use assets

 

 

455

 

 

 

528

 

Platform development, net

 

 

10,240

 

 

 

9,299

 

Subscription acquisition costs, net of current portion

 

 

7,651

 

 

 

8,235

 

Acquired and other intangible assets, net

 

 

56,221

 

 

 

57,356

 

Other long-term assets

 

 

626

 

 

 

639

 

Goodwill

 

 

23,416

 

 

 

19,619

 

Total assets

 

$

186,448

 

 

$

173,983

 

Liabilities, mezzanine equity and stockholders' deficiency

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

19,733

 

 

$

11,982

 

Accrued expenses and other

 

 

18,579

 

 

 

24,011

 

Line of credit

 

 

7,808

 

 

 

11,988

 

Unearned revenue

 

 

60,907

 

 

 

54,030

 

Subscription refund liability

 

 

2,394

 

 

 

3,087

 

Operating lease liabilities

 

 

400

 

 

 

374

 

Liquidated damages payable

 

 

5,497

 

 

 

5,197

 

Current portion of long-term debt

 

 

5,873

 

 

 

5,744

 

Total current liabilities

 

 

121,191

 

 

 

116,413

 

Unearned revenue, net of current portion

 

 

12,591

 

 

 

15,277

 

Operating lease liabilities, net of current portion

 

 

579

 

 

 

785

 

Liquidating damages payable, net of current portion

 

 

-

 

 

 

7,008

 

Other long-term liabilities

 

 

7,108

 

 

 

7,556

 

Deferred tax liabilities

 

 

389

 

 

 

362

 

Long-term debt

 

 

65,179

 

 

 

64,373

 

Total liabilities

 

 

207,037

 

 

 

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 June 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 June 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: 17,827,526 and 12,632,947 shares at June 30, 2022 and December 31, 2021, respectively

 

 

178

 

 

 

126

 

Common stock to be issued

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

258,727

 

 

 

200,410

 

Accumulated deficit

 

 

(292,869

)

 

 

(252,213

)

Total stockholders' deficiency

 

 

(33,964

)

 

 

(51,677

)

Total liabilities, mezzanine equity and stockholders' deficiency

 

$

186,448

 

 

$

173,983

 

 

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

2021

 

2022

 

2021

 

 

($ in thousands, except share data)

Revenue

 

$

65,075

 

 

$

34,746

 

 

$

113,318

 

 

$

68,361

 

Cost of revenue (includes amortization of developed technology and platform development for three months ended 2022 and 2021 of $2,375 and $2,157, respectively and for the six months ended 2022 and 2021 of $4,686 and $4,324, respectively)

 

 

46,729

 

 

 

25,307

 

 

 

75,226

 

 

 

51,049

 

Gross profit

 

 

18,346

 

 

 

9,439

 

 

 

38,092

 

 

 

17,312

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

19,307

 

 

 

16,202

 

 

 

36,523

 

 

 

31,340

 

General and administrative

 

 

15,964

 

 

 

12,535

 

 

 

29,478

 

 

 

23,030

 

Depreciation and amortization

 

 

4,444

 

 

 

3,964

 

 

 

8,646

 

 

 

7,927

 

Loss on impairment of assets

 

 

-

 

 

 

-

 

 

 

257

 

 

 

-

 

Total operating expenses

 

 

39,715

 

 

 

32,701

 

 

 

74,904

 

 

 

62,297

 

Loss from operations

 

 

(21,369

)

 

 

(23,262

)

 

 

(36,812

)

 

 

(44,985

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

Change in valuation of warrant derivative liabilities

 

 

-

 

 

 

360

 

 

 

-

 

 

 

(305

)

Interest expense, net

 

 

(2,506

)

 

 

(2,363

)

 

 

(5,326

)

 

 

(5,183

)

Liquidated damages

 

 

(128

)

 

 

(1,109

)

 

 

(300

)

 

 

(1,364

)

Gain upon debt extinguishment

 

 

-

 

 

 

5,717

 

 

 

-

 

 

 

5,717

 

Total other (expense) income

 

 

(2,634

)

 

 

2,605

 

 

 

(5,626

)

 

 

(1,135

)

Loss before income taxes

 

 

(24,003

)

 

 

(20,657

)

 

 

(42,438

)

 

 

(46,120

)

Income taxes

 

 

1,796

 

 

 

-

 

 

 

1,782

 

 

 

-

 

Net loss

 

$

(22,207

)

 

$

(20,657

)

 

$

(40,656

)

 

$

(46,120

)

Basic and diluted net loss per common share

 

$

(1.22

)

 

$

(1.88

)

 

$

(2.41

)

 

$

(4.30

)

Weighted average number of common shares outstanding ? basic and diluted

 

 

18,258,890

 

 

 

11,012,866

 

 

 

16,847,920

 

 

 

10,737,555

 

 

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Six Months Ended

June 30,

 

 

2022

 

2021

 

 

($ in thousands)

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(40,656

)

 

$

(46,120

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation of property and equipment

 

 

245

 

 

 

220

 

Amortization of platform development and intangible assets

 

 

13,087

 

 

 

12,031

 

Gain upon debt extinguishment

 

 

-

 

 

 

(5,717

)

Amortization of debt discounts

 

 

934

 

 

 

1,001

 

Loss on impairments of assets

 

 

257

 

 

 

-

 

Change in valuation of warrant derivative liabilities

 

 

-

 

 

 

305

 

Noncash and accrued interest

 

 

69

 

 

 

3,632

 

Liquidated damages

 

 

300

 

 

 

1,364

 

Stock-based compensation

 

 

16,466

 

 

 

13,215

 

Deferred income taxes

 

 

(1,782

)

 

 

-

 

Other

 

 

469

 

 

 

(759

)

Change in operating assets and liabilities net of effect of business combination:

 

 

 

 

 

 

Accounts receivable

 

 

5

 

 

 

4,375

 

Subscription acquisition costs

 

 

2,143

 

 

 

(13,784

)

Royalty fees

 

 

7,500

 

 

 

7,500

 

Prepayments and other current assets

 

 

264

 

 

 

(4,060

)

Other long-term assets

 

 

13

 

 

 

(121

)

Accounts payable

 

 

335

 

 

 

4

 

Accrued expenses and other

 

 

(7,131

)

 

 

1,714

 

Unearned revenue

 

 

945

 

 

 

14,934

 

Subscription refund liability

 

 

(693

)

 

 

737

 

Operating lease liabilities

 

 

(107

)

 

 

(404

)

Other long-term liabilities

 

 

(128

)

 

 

-

 

Net cash used in operating activities

 

 

(7,465

)

 

 

(9,933

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(379

)

 

 

(182

)

Capitalized platform development

 

 

(2,784

)

 

 

(1,971

)

Proceeds from sale of equity investment

 

 

2,450

 

 

 

-

 

Payments for acquisition of business, net of cash acquired

 

 

(9,481

)

 

 

(7,057

)

Net cash used in investing activities

 

 

(10,194

)

 

 

(9,210

)

Cash flows from financing activities

 

 

 

 

 

 

Borrowings (repayments) under line of credit

 

 

(4,180

)

 

 

(2,249

)

Proceeds from common stock public offering, net of offering costs

 

 

32,058

 

 

 

-

 

Payments of issuance costs from common stock public offering

 

 

(1,568

)

 

 

-

 

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

 

 

(556

)

 

 

(41

)

Payment of restricted stock liabilities

 

 

(2,152

)

 

 

(716

)

Net cash provided by financing activities

 

 

23,149

 

 

 

16,832

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

5,490

 

 

 

(2,311

)

Cash, cash equivalents, and restricted cash ? beginning of period

 

 

9,851

 

 

 

9,535

 

Cash, cash equivalents, and restricted cash ? end of period

 

$

15,341

 

 

$

7,224

 

Cash, cash equivalents, and restricted cash

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,839

 

 

$

6,723

 

Restricted cash

 

 

502

 

 

 

501

 

Total cash, cash equivalents, and restricted cash

 

$

15,341

 

 

$

7,224

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

4,323

 

 

$

289

 

Cash paid for income taxes

 

 

-

 

 

 

-

 

Noncash investing and financing activities

 

 

 

 

 

 

Reclassification of stock-based compensation to platform development

 

$

1,125

 

 

$

859

 

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

 

 

1,889

 

 

 

-

 

Assumption of liabilities in connection with acquisition of Athlon

 

 

12,642

 

 

 

-

 

Deferred cash payments in connection with acquisition of The Spun

 

 

-

 

 

 

1,639

 

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

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

2021

 

2022

 

2021

Net loss

 

$

(22,207

)

 

$

(20,657

)

 

$

(40,656

)

 

$

(46,120

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (1)

 

 

2,506

 

 

 

2,363

 

 

 

5,326

 

 

 

5,183

 

Deferred income taxes

 

 

(1,796

)

 

 

-

 

 

 

(1,782

)

 

 

-

 

Depreciation and amortization (2)

 

 

6,819

 

 

 

6,121

 

 

 

13,332

 

 

 

12,251

 

Stock-based compensation (3)

 

 

9,099

 

 

 

8,116

 

 

 

16,466

 

 

 

13,215

 

Change in derivative valuations

 

 

-

 

 

 

(360

)

 

 

-

 

 

 

305

 

Liquidated damages (4)

 

 

128

 

 

 

1,109

 

 

 

300

 

 

 

1,364

 

Gain upon debt extinguishment (5)

 

 

-

 

 

 

(5,717

)

 

 

-

 

 

 

(5,717

)

Loss on impairment of assets (6)

 

 

-

 

 

 

-

 

 

 

257

 

 

 

-

 

Professional and vendor fees (7)

 

 

-

 

 

 

1,719

 

 

 

-

 

 

 

2,124

 

Employee restructuring payments (8)

 

 

505

 

 

 

66

 

 

 

679

 

 

 

241

 

Adjusted EBITDA

 

$

(4,946

)

 

$

(7,240

)

 

$

(6,078

)

 

$

(17,154

)

 

(1)

Represents interest expense (net of interest income) of $2,506 and $2,363, for the three months ended June 30, 2022 and 2021, respectively, and interest expense (net of interest income) of $5,326 and $5,183, for the six months ended June 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 $274 and $307 for amortization of debt discounts for the three months ended June 30, 2022 and 2021, respectively, and $934 and $1,001 for amortization of debt discounts for the six months ended June 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 $2,375 and $2,157, for the three months ended June 30, 2022 and 2021, respectively, and depreciation and amortization included within operating expenses of $4,444 and $3,964 for the three months ended June 30, 2022 and 2021, respectively. Represents depreciation and amortization related to our developed technology and Platform included within cost of revenues of $4,686 and $4,324, for the six months ended June 30, 2022 and 2021, respectively, and depreciation and amortization included within operating expenses of $8,646 and $7,927 for the six months ended June 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 impairment of certain assets that no longer are useful.

 

(7)

Represents professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers, and other vendors related to the preparation of periodic reports in order for us to become current in our reporting obligations ("Delinquent Reporting Obligations Services"). With respect to the Delinquent Reporting Obligations Services, we incurred professional and vendor fees in the first quarter of 2021 related to the preparation of our annual reports for fiscal years 2018 and 2019 (which contained the financial information for the quarterly periods during fiscal 2019), and our quarterly reports fiscal 2020. The amount of fees incurred in connection with the Delinquent Reporting Obligations Services is adjusted based on our best estimate of the amount we expect we would ordinarily incur to meet our reporting obligations pursuant to the Exchange Act.

 

(8)

Represents severance payments to the former Chief Financial Officer of Athlon and our former Chief Executive Officer for the three and six months ended June 30, 2022 and 2021.

 


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