The Arena Group's Q3 2025 Earnings Call: Contradictions in Traffic, Debt Strategy, E-commerce, and M&A Approaches

Date of Call: November 13, 2025

Financials Results

• Revenue: $29.8M, down from $33.6M year-ago (Q3 2024 included a $3M one-time licensing-related increase)
• EPS: $0.64 TTM EPS (trailing 12-month income $30.5M / 47.6M shares); Q3 net income $6.9M vs $4.0M year-ago
• Gross Margin: Above 50%, maintained >50% despite traffic volatility

Guidance:

• Company will not provide specific numeric guidance but may give directional guidance
• Management expects sequential top-line (and bottom-line) growth next quarter (directional)
• E-commerce content expected to be stronger in Q4 versus Q4 2024
• ShopHQ and Lindy's expected to be cash-accretive/profitable in 2026
• Refinance is a priority; pursuing multiple options and will proceed from a position of strength

Business Commentary:

• Financial Performance and Profitability:
• The Arena Group reported revenue of $29.8 million for Q3 2025, a decrease from $33.6 million in Q3 2024.
• Despite the decline in revenue, net income rose to $6.9 million, up from $4.0 million a year ago, and adjusted EBITDA increased to $11.9 million from $11.2 million last year.

• The improved profitability is attributed to the company's scalability, variable cost structure, and strategic focus on diversifying revenue streams.

• Algorithm Changes and Traffic Stability:

• The company faced significant traffic volatility due to algorithmic changes, impacting organic traffic in lifestyle and sports categories.
• However, recent data shows stabilization in traffic and significant recovery for e-commerce-related content.
• The stabilization is due to the company's quick response in optimizing content signals, site experience, and technical SEO.

• Cash Generation and Debt Reduction:
• The Arena Group generated $12.1 million in cash from operations during Q3, enabling them to repay their revolving credit facility completely.
• As a result, the company has reduced leverage by more than $10 million in total debt year-to-date.

• This strong cash flow and debt reduction reflect the company's focus on optimizing its balance sheet and capital structure.

• M&A Strategy and Asset Acquisitions:

• The company acquired the digital assets and IP of two properties, ShopHQ and Lindy's Sports, spending $2 million in total.
• These acquisitions expand the company's e-commerce and sports portfolios and are expected to be accretive for profit in 2026.
• The strategic M&A is focused on targeting high-value, profit-driving acquisitions that align with the company's scalable operating model.

Sentiment Analysis:

Overall Tone: Positive

• Management described Q3 as "another profitable quarter" with margins that "surpassed industry averages." Net margin improved to 23.2% and EBITDA margin to 39.9% (vs 11.9% and 33.3% a year ago), generated $12.1M cash from operations, reduced leverage and raised cash to $12.5M, and reiterated optimism on stabilization and e-commerce recovery.

Q&A:

• Question from Mark Argento (Lake Street Capital Markets, LLC, Research Division): The Google algorithm changes created volatility — are you working off a lower base or will you see a trend back toward prior levels? Walk through what changed and how you managed through it.
  Response: Traffic stabilized after algorithm updates; e-commerce/deals content is expected to be stronger in Q4 versus Q4 2024, news remains below its Q2 peak but has stabilized after technical/SEO fixes and tests.

• Question from Mark Argento (Lake Street Capital Markets, LLC, Research Division): Do you think you've taken share vs competitors given the disruption, or how do you view your position in the industry?
  Response: Management believes they weathered the update better than many peers, maintaining cash generation and demonstrating adaptive execution across the team.

• Question from Mark Argento (Lake Street Capital Markets, LLC, Research Division): Your margins are strong — is that because content costs are pegged to revenue and therefore variable versus fixed overhead?
  Response: Yes — largest cost (content) is tied to revenue, producing a variable cost structure that has enabled consistent gross margins above 50% across traffic scenarios.

• Question from Mark Argento (Lake Street Capital Markets, LLC, Research Division): Where are you on the refinance process — still a 2025 event or later?
  Response: Refinance is a priority and being pursued from a position of strength; banks have interest but may want several quarters of consistent profitability, so timing is flexible and deliberate to maximize shareholder value.

• Question from Kevin Rendino (BC Partners): Can you describe the ShopHQ acquisition and how you plan to run it (asset-light, drop-ship model, flow-through to your model)?
  Response: ShopHQ is an asset-light dropshipping relaunch using acquired email/data; management is leveraging newsletters, Encore AI and video/social funnels to drive transactions and expects the asset to be cash-accretive in 2026.

• Question from Kevin Rendino (BC Partners): Are you taking commission on sales and what are the operating expenses for ShopHQ?
  Response: Revenue is a share of gross from drop-shipping partners; the acquisition included <10 personnel for procurement; remaining costs are largely variable (marketing/partners) and the business can scale without significant capital.

• Question from Kevin Rendino (BC Partners): What margin should we expect from ShopHQ relative to your other lines?
  Response: Margins likely comparable to the news/media business, a bit below performance publishing margins, while revenue growth should be significant.

• Question from John Fichthorn (Dialectic Capital Management, LP): How does the refinance plan impact the share repurchase program — will you wait to refi before repurchases?
  Response: Share repurchases are considered when capital availability and trading restrictions allow; recent acquisitions and nonpublic information constrained repurchases, but management sees the stock as undervalued and may buy when appropriate.

• Question from John Fichthorn (Dialectic Capital Management, LP): What's your M&A hurdle — you mentioned one deal per quarter; what returns/criteria are you targeting?
  Response: Target asset-light deals with extreme value, profit accretion, and payback within ~12 months, delivering strong ROI and fitting the company's operating model.

• Question from John Fichthorn (Dialectic Capital Management, LP): Given stabilization and M&A additions, is sequential top-line growth next quarter a fair assumption?
  Response: Yes — management will not give specific guidance but directionally expects sequential growth next quarter.

• Question from John Fichthorn (Dialectic Capital Management, LP): Which lever is the biggest growth driver — EP rollout, commerce, or M&A?
  Response: Multiple levers exist, but near-term upside centers on rapidly growing first‑party user acquisition (~40,000 email signups/day) and converting that audience into e-commerce and monetization via data/Encore.

• Question from John Fichthorn (Dialectic Capital Management, LP): How will you measure success in converting commerce buyers to content consumers and monetizing with AI?
  Response: Success metrics focus on CAC, conversion and transaction rates, segment-level audience monetization enabled by AI/LLM-driven data, and ultimately profitability/cash generation per cohort.

• Question from Jonathan Old (Long Meadow Investors, LLC): Update on TravelHost and what does a typical $1M acquisition look like in 3–5 years — returns/maturity?
  Response: TravelHost has been relaunched, is roughly breakeven and expected to be profitable in 2026; M&A targets aim for asset-light deals requiring no new debt, rapid payback and material upside when combined with Arena's platform and execution.

• Question from Jonathan Old (Long Meadow Investors, LLC): How large is your M&A pipeline — how many deals are you evaluating at a time?
  Response: Pipeline is robust — management reviews a handful of new opportunities per week, ranging from individual properties to portfolios, and moves quickly on targets that meet payback and ROI criteria.

Contradiction Point 1

Traffic and Algorithm Changes

It involves conflicting statements regarding the impact of algorithm changes on traffic and the company's ability to maintain market share, which directly impacts revenue and market positioning.

Are you using a lower base for Q4 traffic or expecting a return to pre-algorithm change levels? - Mark Argento (Lake Street Capital Markets, LLC)

2025Q3: Q4 traffic is expected to stabilize. We are off a lower base from Q2 but have seen stabilization and expect growth in e-commerce content. We're optimistic about additional lift in organic traffic. - Paul Edmondson(CEO)

Is a turnaround in overall page views expected, and how are you addressing audience migration to social platforms? - Daniel Paul Day (B. Riley)

2023Q3: The decline in page views is concentrated in a few areas like The Spun and HubPages, while other brands like TheStreet, FanNation, and Athlon Sports show growth. We're optimistic about our ability to monetize and grow in 2024 due to upcoming events and strategic initiatives. - Ross Levinsohn(CEO)

Contradiction Point 2

Debt Financing and Refinancing Strategy

It involves the company's approach to debt financing and refinancing, which is crucial for financial stability and investor trust.

What's the status of your debt refinancing? - Unknown Analyst (BC Partners)

2025Q3: We are actively pursuing refinancing to secure favorable terms. We are in discussions with traditional banks and exploring alternative markets for better terms. The focus is on long-term value creation. - Geoffrey Wait(CFO)

Is Arena Group considering using equity raises instead of pure debt to address debt? - Griffin Boss (B. Riley)

2023Q1: Exploring various debt and equity solutions. Ongoing discussion with existing and potential partners. Emphasis on finding best solutions for business and shareholders. - Ross Levinsohn(CEO)

Contradiction Point 3

E-commerce Strategy and Growth Potential

It touches on the company's e-commerce strategy and growth potential, which are critical for its business model and revenue projections.

Will converting existing traffic to e-commerce buyers be the primary growth driver in the near term? - John Fichthorn (Dialectic Capital Management, LP)

2025Q3: We see growth potential in converting new users into commerce buyers, expanding audience through social and content, and utilizing AI technology for improved monetization. - Paul Edmondson(CEO)

Can you explain Arena Group's e-commerce strategy and opportunities? - Mark Argento (Lake Street)

2023Q1: E-commerce revenue quadrupled this quarter. Hybrid approach with affiliate deals and content to commerce on platforms. Working with top platforms and exploring print realm opportunities. Ongoing experiments to grow revenue. - Ross Levinsohn(CEO)

Contradiction Point 4

M&A Strategy and Deal Structure

It involves differing statements about the company's approach to M&A and the types of deals they are targeting, which impacts growth strategy and financial decisions.

What will the typical deal structure be under your M&A strategy in 3 years? - Jonathan Old (Long Meadow Investors, LLC)

2025Q3: We look for deals with significant upside and no additional debt. Opportunities are robust, and we review several new opportunities weekly, including traditional digital media and product companies. - Paul Edmondson(CEO)

Why is your revenue per page view growing despite the broader market trend? - Mark Argento (Lake Street Capital Markets)

2023Q3: We look for extreme values offering profit accretion and ROI within 12 months. We are active in digital media asset purchases for growth opportunities. - Geoffrey Wait(CFO)

Contradiction Point 5

M&A Strategy and Integration Costs

It involves the company's approach to mergers and acquisitions, and the associated integration costs, which impact financial planning and growth opportunities.

What are the operating expenses for ShopHQ? - Unknown Analyst (BC Partners)

2025Q3: We look for deals with significant upside and no additional debt. Opportunities are robust, and we review several new opportunities weekly, including traditional digital media and product companies. - Paul Edmondson(CEO)

What is the outlook for future M&A and potential opportunities this year? - Griffin Boss (B. Riley)

2023Q1: Always looking at opportunities. Integration ongoing for recent acquisitions. Landscape wide open with many struggling companies. Focus on accretive deals. - Ross Levinsohn(CEO)