Enthusiast Gaming Holdings Inc. (“Enthusiast Gaming” or the
“Company”) (NASDAQ: EGLX; TSX: EGLX), an independent
gaming media and entertainment company, today announced financial
results for the three months ended March 31, 2023 (“Q1 2023”).
Q1 2023 Financial
Highlights
- Significant increase in high-margin
revenue streams compared to Q1 2022, including Brand Solutions
(formerly Direct Sales) up 92% to $10.0 million, and Subscriptions
up 19% to a record $4.0 million.
- Gross profit increased 24% to $16.8
million, compared to $13.5 million in Q1 2022, with margins
expanding 1,050 bps YoY to 39.1% from 28.6% in Q1
2022.
“The rapid transformation of Enthusiast Gaming
from a collection of entrepreneurial assets to an enterprise-scale
platform company built around a single technology stack is
underway,” commented Nick Brien, CEO of Enthusiast Gaming. “In the
10 weeks since I joined the company, we have begun to reorganize
around a unified vision, strategy, structure and processes that
will unlock the true potential of our diverse brands and highly
engaged audience. There is a tremendous opportunity in front of us
to increase the spend of our current advertisers, while attracting
new brands to the emergent gaming marketing sector.”
Continued Brien, “Our first quarter 2023 results
demonstrate the significant upside potential of our business. We
focused on delivering integrated marketing solutions to brands
(formerly direct sales) resulting in a near doubling of revenue to
$10 million, and we drove a 19% increase in Subscription revenue by
serving our communities of enthusiast gamers. The result was a 24%
increase in gross profit dollars and a 1,050 bps YoY increase in
gross margins to 39.1%, despite the digital ad market headwinds
which pressured our programmatic monetization.”
“We are transforming every aspect of our
business model at speed,” continued Mr. Brien. “The reorganization
of the leadership team and focus on the North American marketplace
is the first step in the strategic change process. We are
strengthening our product and content offerings to reinvent our
growth engine and create a more profitable revenue flywheel. Our
operations will be enhanced by increased automation and AI
application to ensure maximum efficiency and optimum yield
extraction of every dollar of revenue earned. We are focused on
developing smarter brand activation opportunities, not just selling
digital ads. Our company’s unique ability to create bespoke brand
experiences, increase site subscriptions, launch new products,
enable community commerce while building strategic partnerships
with major sports leagues like the NFL, all reinforce our unique
opportunity to create diversified revenue streams that deliver
value to shareholders.”
Q1 2023 Operational
Highlights
- Completion of the first season of
NFL Tuesday Night Gaming (NFL TNG), including the production and
broadcasting of 19 episodes, connecting fans with NFL stars and
gamers, and generating more than 73 million impressions across
livestream and social content since the debut in September 2022.
Recent NFL TNG media sponsors include Hulu + Live TV, Xbox,
Paramount+, Disney+, Puss In Boots: The Last Wish, Nickelodeon, the
FDA, TurboTax, Verizon, Campbell’s Chunky Soup, Hasbro, Sour Patch
Kids, and Carnival Cruise Line.
- Renewals or new business with key
notable advertisers including Coca-Cola, Paramount Pictures,
Universal Pictures, Toyota Canada, Hasbro, Hut8, LEGO, and the US
Navy. Renewals and additional business with existing customers
accounted for 59% of brand solutions in Q1 2023.
- A record of 2,600 attendees from
more than 1,200 companies participated in Pocket Gamer Connects
London in January.
- EV.IO, the Company’s browser-based
first-person shooter cross-chain blockchain game, won multiple
“Game of the Year” awards in the Esports and FPS categories in
January.
- Luminosity Gaming, the Company’s
esports division, won 9 championships and gained 35 million
impressions across all of its social channels in Q1 2023.
- The Company’s Tiktok network
achieved over 300 million views across 11 diverse channels in Q1
2023.
- The Company was ranked as the #1
gaming property for unique visitor traffic in the United States by
Comscore in January (Comscore Media Metrix®, Games, January 2023,
U.S.).
- Paid subscribers increased 5% to
275,000 at March 31, 2023 from 262,000 at December 31, 2022.
First Quarter 2023 Results
Comparison
Revenue was $42.9 million in Q1 2023 compared to
$47.2 million in Q1 2022. Brand solutions (included in revenue)
increased by 92% to $10.0 million, Esports & Entertainment
revenue increased 72% to $3.4 million, and Subscription revenue
increased 19% to $4.0 million. The decline in total revenue was
driven by Media & Content revenue which decreased 15% to $35.5
million, driven by: i) less video views due to a separation from a
number of non-profitable creator channels, ii) YouTube’s
introduction of stricter language moderation on monetized videos,
and iii) lower CPMs primarily due to the expansion of YouTube
Shorts which monetize at lower rates than long form video. Web page
views increased 4%.
Gross profit increased 24% to $16.8 million in
Q1 2023 compared to $13.5 million in Q1 2022, with margins
expanding 1,050 bps YoY to 39.1% from 28.6% in Q1 2022.
Net loss and comprehensive loss was $8.7 million
in Q1 2023, compared to $12.2 million in Q1 2022. Net loss per
basic and diluted share was $0.06 in Q1 2023 compared to $0.08 in
Q1 2022.
As of March 31, 2023, cash balance was $3.5
million compared to $7.4 million as of December 31, 2023. The $3.9
million decrease is primarily the result of a $2.6 million outflow
in cash from operations and $1.1 million of repayments on the
Company’s term credit.
In March, the Company received approval from its
lender to extend the maturity dates for the credit facility,
together with the Company’s $5 million operating facility, for an
additional year to December 31, 2024.
Conference Call
Management will host a conference call and
webcast on May 15, 2023, at 5 p.m. ET to review and discuss the
first quarter 2023 results. Conference call details:
- Toll Free Dial-in: 1-855-239-1101
(Conference ID: 10178677)
- Live webcast:
https://www.enthusiastgaming.com/investors
A replay of the webcast will be available on the
Investor Relations page of the Enthusiast Gaming website.
Supplemental Information
Certain information provided in this news
release is extracted from financial statements and management’s
discussion & analysis (“MD&A”) of the Company for the three
months ended March 31, 2023, and should be read in conjunction with
them. It is only in the context of the fulsome information and
disclosures contained in the financial statements and MD&A that
an investor can properly analyze this information. The financial
statements and MD&A have been published on the Company’s
profile on SEDAR and EDGAR. All amounts are in Canadian
dollars.
About Enthusiast Gaming
Enthusiast Gaming is an independent gaming media
and entertainment company, building the largest media and content
platform for video game players and esports fans to connect and
compete worldwide. Combining the elements of its five core pillars:
Communities, Content, Creators, Commerce and Experiences,
Enthusiast Gaming provides a unique opportunity for marketers to
create integrated brand solutions to connect with coveted GenZ and
Millennial audiences. Through its proprietary mix of digital media,
content and gaming assets, Enthusiast Gaming continues to grow its
network of communities, reflecting the diversity of gaming
enthusiasts today.
Investor Contacts
Enthusiast Gaming – Alex Macdonald, Chief Financial OfficerFNK
IR – Rob Fink / Matt Chesler, CFAinvestor@enthusiastgaming.com
Neither the Toronto Stock Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the exchange)
accepts responsibility for the adequacy or accuracy of this
release.
Forward-Looking Statements
This news release contains certain statements
that may constitute forward-looking information under applicable
securities laws. All statements, other than those of historical
fact, which address activities, events, outcomes, results,
developments, performance or achievements that Enthusiast Gaming
anticipates or expects may or will occur in the future (in whole or
in part) should be considered forward-looking information. Often,
but not always, forward-looking information can be identified by
the use of words such as “plans”, “expects”, “is expected”,
“budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates”, or “believes” or variations (including negative
variations) of such words and phrases, or statements formed in the
future tense or indicating that certain actions, events or results
“may”, “could”, “would”, “might” or “will” (or other variations of
the forgoing) be taken, occur, be achieved, or come to pass.
Forward-looking statements in this news release include, but are
not limited to, statements regarding trends in certain financial
and operating metrics of the Company, and expectations relating to
the financial performance and the financial results of future
periods.
Forward-looking statements are based on
assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current
conditions and expected future developments, including, but not
limited to, expectations and assumptions concerning: interest and
foreign exchange rates; capital efficiencies, cost saving and
synergies; growth and growth rates; the success in the esports and
gaming media industry; the Company’s growth plan, and judgment
applied in the application of the Company’s accounting policies and
in the preparation of financial statements in accordance with
applicable financial reporting standards. While Enthusiast Gaming
considers these assumptions to be reasonable, based on information
currently available, they may prove to be incorrect. Readers are
cautioned not to place undue reliance on forward-looking
statements. In addition, forward-looking statements necessarily
involve known and unknown risks, including, without limitation,
risks associated with general economic conditions; adverse industry
events; and future legislative, tax and regulatory developments.
Readers are cautioned that the foregoing list is not exhaustive.
For more information on the risks, uncertainties and assumptions
that could cause anticipated opportunities and actual results to
differ materially, please refer to the public filings of Enthusiast
Gaming which are available on SEDAR at www.sedar.com. Readers are
further cautioned not to place undue reliance on forward-looking
statements as there can be no assurance that the plans, intentions
or expectations upon which they are placed will occur. Such
information, although considered reasonable by management at the
time of preparation, may prove to be incorrect and actual results
may differ materially from those anticipated. Forward-looking
statements contained in this news release are expressly qualified
by this cautionary statement and reflect our expectations as of the
date hereof, and thus are subject to change thereafter. Enthusiast
Gaming disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
|
|
|
|
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Financial
Position |
As of March 31, 2023 and December 31, 2022 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash |
$ |
3,466,909 |
|
$ |
7,415,516 |
|
|
|
Trade and
other receivables |
|
31,965,982 |
|
|
37,868,107 |
|
|
|
Investments |
|
124,939 |
|
|
125,000 |
|
|
|
Loans
receivable |
|
- |
|
|
50,935 |
|
|
|
Income tax
receivable |
|
159,807 |
|
|
367,092 |
|
|
|
Prepaid expenses |
|
1,474,635 |
|
|
2,017,004 |
|
|
Total current assets |
|
37,192,272 |
|
|
47,843,654 |
|
|
Non-current |
|
|
|
|
|
|
Property and
equipment |
|
178,176 |
|
|
180,621 |
|
|
|
Right-of-use
assets |
|
1,868,052 |
|
|
2,099,996 |
|
|
|
Investment
in associates and joint ventures |
|
2,277,584 |
|
|
2,450,031 |
|
|
|
Long-term
portion of prepaid expenses |
|
279,586 |
|
|
279,814 |
|
|
|
Intangible
assets |
|
113,916,348 |
|
|
116,967,438 |
|
|
|
Goodwill |
|
171,642,377 |
|
|
171,615,991 |
|
|
Total assets |
$ |
327,354,395 |
|
$ |
341,437,545 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
$ |
28,717,414 |
|
$ |
32,823,320 |
|
|
|
Contract
liabilities |
|
4,735,649 |
|
|
5,380,378 |
|
|
|
Income tax
payable |
|
246,201 |
|
|
129,485 |
|
|
|
Current
portion of long-term debt |
|
4,352,940 |
|
|
17,431,625 |
|
|
|
Current portion of deferred payment liability |
|
2,495,053 |
|
|
2,391,863 |
|
|
|
Current
portion of lease liabilities |
|
839,390 |
|
|
872,429 |
|
|
|
Current
portion of other long-term debt |
|
10,882 |
|
|
10,891 |
|
|
Total current liabilities |
|
41,397,529 |
|
|
59,039,991 |
|
|
Non-current |
|
|
|
|
|
|
Long-term
debt |
|
11,985,100 |
|
|
- |
|
|
|
Long-term portion of deferred payment liability |
|
1,314,363 |
|
|
1,451,939 |
|
|
|
Long-term
lease liabilities |
|
1,268,678 |
|
|
1,478,438 |
|
|
|
Other
long-term debt |
|
144,482 |
|
|
144,844 |
|
|
|
Deferred tax
liability |
|
24,193,054 |
|
|
24,671,326 |
|
|
Total liabilities |
$ |
80,303,206 |
|
$ |
86,786,538 |
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
Share
capital |
|
442,781,376 |
|
|
442,781,376 |
|
|
|
Contributed
surplus |
|
31,533,073 |
|
|
30,402,742 |
|
|
|
Accumulated
other comprehensive income |
|
8,636,399 |
|
|
8,629,848 |
|
|
|
Deficit |
|
(235,899,659 |
) |
|
(227,162,959 |
) |
|
Total shareholders' equity |
|
247,051,189 |
|
|
254,651,007 |
|
|
Total liabilities and shareholders' equity |
$ |
327,354,395 |
|
$ |
341,437,545 |
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss |
For the three months ended March 31, 2023 and
2022 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
42,879,966 |
|
$ |
47,167,538 |
|
|
Cost of sales |
|
26,114,408 |
|
|
33,676,159 |
|
|
Gross margin |
|
16,765,558 |
|
|
13,491,379 |
|
|
Operating expenses |
|
|
|
|
|
|
Professional fees |
|
453,336 |
|
|
924,821 |
|
|
|
Consulting
fees |
|
1,308,484 |
|
|
1,478,174 |
|
|
|
Advertising
and promotion |
|
1,456,111 |
|
|
327,447 |
|
|
|
Office and
general |
|
2,291,783 |
|
|
2,262,905 |
|
|
|
Salaries and
wages |
|
9,207,024 |
|
|
8,696,875 |
|
|
|
Technology
support, web development and content |
|
5,296,024 |
|
|
3,458,868 |
|
|
|
Esports
player, team and game expenses |
|
635,447 |
|
|
1,511,488 |
|
|
|
Foreign
exchange loss |
|
114,557 |
|
|
8,587 |
|
|
|
Share-based
compensation |
|
1,130,331 |
|
|
1,386,181 |
|
|
|
Amortization
and depreciation |
|
3,338,023 |
|
|
4,767,024 |
|
|
Total operating expenses |
|
25,231,120 |
|
|
24,822,370 |
|
|
|
|
|
|
|
|
|
Other expenses (income) |
|
|
|
|
|
|
Share of net
loss (income) from investment in associates and joint ventures |
|
172,447 |
|
|
(296,041 |
) |
|
|
Interest and
accretion |
|
610,340 |
|
|
1,430,669 |
|
|
|
Gain on
revaluation of deferred payment liability |
|
(172,024 |
) |
|
(1,015,538 |
) |
|
|
Interest income |
|
(61,207 |
) |
|
(1,401 |
) |
|
Net loss before income taxes |
|
(9,015,118 |
) |
|
(11,448,680 |
) |
|
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
|
Current tax
expense |
|
203,492 |
|
|
110,529 |
|
|
|
Deferred tax recovery |
|
(481,910 |
) |
|
(526,280 |
) |
|
Net loss for the period |
|
(8,736,700 |
) |
|
(11,032,929 |
) |
|
|
|
|
|
|
|
|
Other comprehensive (loss) income |
|
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
|
Foreign
currency translation adjustment |
|
6,551 |
|
|
(1,208,430 |
) |
|
Net loss and comprehensive loss for the
period |
$ |
(8,730,149 |
) |
$ |
(12,241,359 |
) |
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
$ |
(0.06 |
) |
$ |
(0.08 |
) |
|
Weighted average number of common shares |
|
|
|
|
|
|
outstanding, basic and diluted |
|
151,767,243 |
|
|
133,605,479 |
|
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Cash
Flows |
For the three months ended March 31, 2023 and
2022 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
|
|
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
Net loss for
the period |
$ |
(8,736,700 |
) |
$ |
(11,032,929 |
) |
|
Items not
affecting cash: |
|
|
|
|
|
Amortization and depreciation |
|
3,338,023 |
|
|
4,767,024 |
|
|
Share-based compensation |
|
1,130,331 |
|
|
1,386,181 |
|
|
Interest and accretion |
|
83,480 |
|
|
1,227,562 |
|
|
Deferred tax recovery |
|
(481,910 |
) |
|
(526,280 |
) |
|
Share of net loss (income) from investment in associates and joint
ventures |
|
172,447 |
|
|
(296,041 |
) |
|
Gain on revaluation of deferred payment liability |
|
(172,024 |
) |
|
(1,015,538 |
) |
|
Foreign exchange gain |
|
(1,691 |
) |
|
13,456 |
|
|
Shares for services |
|
- |
|
|
63,320 |
|
|
Provisions |
|
159,250 |
|
|
- |
|
|
Changes in
working capital: |
|
|
|
|
|
Changes in trade and other receivables |
|
5,793,769 |
|
|
4,185,031 |
|
|
Changes in prepaid expenses |
|
542,369 |
|
|
789,542 |
|
|
Changes in loans receivable |
|
- |
|
|
125,995 |
|
|
Changes in accounts payable and accrued liabilities |
|
(4,105,906 |
) |
|
(7,236,523 |
) |
|
Changes in contract liabilities |
|
(644,729 |
) |
|
(22,668 |
) |
|
Changes in income tax |
|
439,202 |
|
|
107,480 |
|
|
Income tax paid |
|
(115,201 |
) |
|
(71,016 |
) |
|
Net cash used in operating activities |
|
(2,599,290 |
) |
|
(7,535,404 |
) |
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
Acquisition
of intangible assets |
|
(27,488 |
) |
|
- |
|
|
Acquisition
of property and equipment |
|
(18,531 |
) |
|
(1,757 |
) |
|
Net cash provided by (used in) investing
activities |
|
(46,019 |
) |
|
(1,757 |
) |
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
Repayment of
long-term debt |
|
(1,088,235 |
) |
|
(500,000 |
) |
|
Proceeds
from exercise of options |
|
- |
|
|
69,821 |
|
|
Repayment of
other long-term debt |
|
(2,968 |
) |
|
(2,741 |
) |
|
Lease
payments |
|
(265,523 |
) |
|
(240,001 |
) |
|
Net cash provided by financing activities |
|
(1,356,726 |
) |
|
(672,921 |
) |
|
|
|
|
|
|
|
Foreign
exchange effect on cash |
|
53,428 |
|
|
(306,151 |
) |
|
Net change
in cash |
|
(3,948,607 |
) |
|
(8,516,233 |
) |
|
Cash, beginning of period |
|
7,415,516 |
|
|
22,654,262 |
|
|
Cash, end of period |
$ |
3,466,909 |
|
$ |
14,138,029 |
|
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