Enthusiast Gaming Holdings Inc. (“Enthusiast
Gaming” or the “Company”) (NASDAQ:EGLX; TSX:EGLX), an integrated
gaming entertainment company, today announced financial results for
the three months ended March 31, 2022 (“Q1 2022”).
“2022 is off to a very strong start, led by
accelerated revenue growth and substantial margin expansion. Q1
2022 gross profit was particularly strong and effectively equal to
Q4 2021 gross profit, despite a strong seasonal difference between
the two periods,” commented Adrian Montgomery, CEO of
Enthusiast Gaming. “Our flywheel model, centered around
communities, content, creators, and experiences, continues to drive
increasing value. Our team is well positioned to continue
delivering rapid top line growth, while increasing gross profit at
a significantly faster rate. Further, to be able to accelerate
revenue growth in a quarter that is seasonally the slowest is a
strong sign for the balance of the year. We are confident these
trends will continue as we focus on meeting profitability
objectives in the short term.”
Q1 2022 Financial
Highlights
- Revenue of $47.2 million, a 57% increase vs revenue of $30.0
million in Q1 2021. The year-over-year increase in revenue was
driven by increased content viewership, stronger RPMs across both
web and video, higher direct sales, higher subscription revenue,
and the acquisitions and growth of the Addicting Games and U.GG
properties.
- Gross profit of $13.5 million, a 127% increase vs gross profit
of $5.9 million in Q1 2021 and effectively equal to Q4 2021 gross
profit of $13.7 million, despite a strong seasonal difference
between the two periods.
- Gross margin of 28.6%, an increase of 880 bps vs gross margin
of 19.8% in Q1 2021. The increase in gross margin is driven by the
strong performance of Addicting Games and U.GG, as well as the
higher direct sales and subscription revenue.
- Direct sales of $5.2 million, a 136% increase vs direct sales
of $2.2 million in Q1 2021. Renewals and additional business with
existing customers accounted for 65% of direct sales. Direct sales
are included in revenue.
- Subscription revenue of $3.3 million, an 83% increase vs
subscription revenue of $1.8 million in Q1 2021. The increase in
subscription revenue was driven by an increase in paid subscribers.
Paid subscribers were 233,000 as at March 31, 2022, a 70% increase
vs paid subscribers of 137,000 as at March 31, 2021.
Q1 2022 Operational
Highlights
- The Company’s audience consumed 11.3 billion views of content
across the web and video platforms, a 14% increase vs 9.9 billion
in Q1 2021.
- Renewals or additional business with key partners including
ExitLag, US Navy, HBO Max, Truth Initiative, DoorDash, e.l.f
Cosmetics, H&R Block.
- Luminosity Gaming’s total social following reached 145 million
globally in January 2022, having grown 13% since the last study in
October 2021. In addition, the hours watched for Luminosity
Gaming’s esports teams on Twitch surpassed 32 million globally in
January, an increase of 34% since the last study, according to a
Nielsen study.
- Launched a partnership with Fractal, an NFT marketplace
co-founded by Justin Kan, co-founder of Twitch. The partnership
marks Enthusiast Gaming’s first with an NFT marketplace, and will
see NFTs integrated into one of the Company’s HTML5-based games,
EV.IO.
- Ranked as the largest property in the Games category in the
United Kingdom and Canada, based on digital media ratings from
Comscore.
Organizational Update
The Company would also like to announce that
Menashe Kestenbaum has left the Company’s Board of Directors. The
Company thanks Menashe for his service and wishes him success in
his future endeavors.
Earnings Announcement and Supplemental
Information
Management will host a conference call and
webcast on May 16, 2022, at 5:00 p.m. Eastern Time to review and
discuss the first quarter 2022 results.
Please call the following numbers to
participate:
North America (toll-free): 1-855-327-6837
International: 1-631-891-4304
Conference ID: 10019138
A live webcast can be heard at
https://www.enthusiastgaming.com/shareholder-information/. If you
are unable to join live, an archived recording of the webcast will
be available on the Investor Relations page of the Enthusiast
Gaming website.
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, 2022, 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 integrated gaming
entertainment company, building the largest media and content
platform for video game and esports fans to connect and engage
worldwide. Combining the elements of its four core pillars:
Communities, Content, Creators, and Experiences, Enthusiast Gaming
provides a unique opportunity and integrated approach to reach and
connect with its coveted GenZ and Millennial audience. Through its
proprietary mix of digital media and entertainment assets,
Enthusiast Gaming has built a vast network of like-minded
communities to deliver the ultimate fan experience.
Contacts
Enthusiast Gaming Investor Relations: Eric
Bernofsky, Chief Corporate Officer
investor@enthusiastgaming.com
Media Relations: Derek Holota, Provident
Communications Derek@providentcomms.com 343-422-5606
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, 2022 and December 31, 2021 |
|
|
|
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash |
$ |
14,138,029 |
|
$ |
22,654,262 |
|
|
|
Trade and
other receivables |
|
29,616,959 |
|
|
33,801,990 |
|
|
|
Investments |
|
131,252 |
|
|
131,342 |
|
|
|
Loans
receivable |
|
50,935 |
|
|
176,931 |
|
|
|
Income tax
receivable |
|
399,509 |
|
|
356,366 |
|
|
|
Prepaid expenses |
|
1,355,642 |
|
|
2,145,184 |
|
|
Total current assets |
|
45,692,326 |
|
|
59,266,075 |
|
|
Non-current |
|
|
|
|
|
|
Property and
equipment |
|
223,063 |
|
|
247,988 |
|
|
|
Right-of-use
assets |
|
2,601,612 |
|
|
2,885,662 |
|
|
|
Investment
in associates and joint ventures |
|
1,181,310 |
|
|
885,269 |
|
|
|
Long-term
portion of prepaid expenses |
|
258,162 |
|
|
261,922 |
|
|
|
Intangible
assets |
|
123,975,000 |
|
|
129,138,595 |
|
|
|
Goodwill |
|
193,942,515 |
|
|
195,097,659 |
|
|
Total assets |
$ |
367,873,988 |
|
$ |
387,783,170 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
$ |
27,032,387 |
|
$ |
34,391,221 |
|
|
|
Contract
liabilities |
|
3,867,901 |
|
|
3,890,569 |
|
|
|
Income tax
payable |
|
193,701 |
|
|
114,094 |
|
|
|
Current
portion of long-term debt |
|
2,000,000 |
|
|
2,000,000 |
|
|
|
Current portion of deferred payment liability |
26,702,412 |
|
|
27,244,146 |
|
|
|
Current
portion of lease contract liabilities |
|
771,736 |
|
|
796,835 |
|
|
|
Current
portion of other long-term debt |
|
10,961 |
|
|
11,121 |
|
|
Total current liabilities |
|
60,579,098 |
|
|
68,447,986 |
|
|
Non-current |
|
|
|
|
|
|
Long-term
debt |
|
7,226,838 |
|
|
7,681,867 |
|
|
|
Long-term
portion of deferred payment liability |
|
20,084,613 |
|
|
20,794,275 |
|
|
|
Long-term
lease contract liabilities |
|
1,979,741 |
|
|
2,213,512 |
|
|
|
Other
long-term debt |
|
134,154 |
|
|
136,324 |
|
|
|
Deferred tax
liability |
|
25,070,291 |
|
|
25,740,885 |
|
|
Total liabilities |
$ |
115,074,735 |
|
$ |
125,014,849 |
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
Share
capital |
|
388,213,957 |
|
|
387,087,948 |
|
|
|
Contributed
surplus |
|
26,631,643 |
|
|
25,485,361 |
|
|
|
Accumulated
other comprehensive income (loss) |
|
(681,264 |
) |
|
527,166 |
|
|
|
Deficit |
|
(161,365,083 |
) |
|
(150,332,154 |
) |
|
Total shareholders' equity |
|
252,799,253 |
|
|
262,768,321 |
|
|
Total liabilities and shareholders' equity |
$ |
367,873,988 |
|
$ |
387,783,170 |
|
Enthusiast Gaming Holdings Inc. |
|
|
|
|
Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss |
|
For the three months ended March 31, 2022 and
2021 |
|
|
|
|
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
|
|
|
|
March 31, 2022 |
|
March 31, 2021 |
|
|
|
|
|
|
|
|
Revenue |
$ |
47,167,538 |
|
$ |
30,022,335 |
|
|
Cost of sales |
|
33,676,159 |
|
|
24,091,327 |
|
|
Gross margin |
|
13,491,379 |
|
|
5,931,008 |
|
|
Operating expenses |
|
|
|
|
|
|
Professional fees |
|
924,821 |
|
|
737,496 |
|
|
|
Consulting
fees |
|
1,478,174 |
|
|
1,310,627 |
|
|
|
Advertising
and promotion |
|
327,447 |
|
|
1,042,354 |
|
|
|
Office and
general |
|
2,262,905 |
|
|
706,945 |
|
|
|
Salaries and
wages |
|
8,696,875 |
|
|
4,628,275 |
|
|
|
Technology
support, web development and content |
|
3,458,868 |
|
|
1,394,883 |
|
|
|
Esports
player, team and game expenses |
|
1,511,488 |
|
|
1,528,605 |
|
|
|
Foreign
exchange loss (gain) |
|
8,587 |
|
|
(10,133 |
) |
|
|
Share-based
compensation |
|
1,386,181 |
|
|
5,760,036 |
|
|
|
Amortization
and depreciation |
|
4,767,024 |
|
|
1,635,854 |
|
|
Total operating expenses |
|
24,822,370 |
|
|
18,734,942 |
|
|
|
|
|
|
|
|
|
Other expenses (income) |
|
|
|
|
|
|
Share of
(income) loss from investment in associates and joint ventures |
|
(296,041 |
) |
|
78,418 |
|
|
|
Interest and
accretion |
|
1,430,669 |
|
|
791,314 |
|
|
|
Interest
income |
|
(1,401 |
) |
|
(18,320 |
) |
|
|
Gain on
revaluation of deferred payment liability |
|
(1,015,538 |
) |
|
- |
|
|
|
Gain on
repayment of long-term debt |
|
- |
|
|
(39,502 |
) |
|
|
Change in
fair value of investment |
|
- |
|
|
(3,984 |
) |
|
Net loss before income taxes |
|
(11,448,680 |
) |
|
(13,611,860 |
) |
|
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
|
Current tax
expense (recovery) |
|
110,529 |
|
|
(14,655 |
) |
|
|
Deferred tax recovery |
|
(526,280 |
) |
|
(79,779 |
) |
|
Net loss for the period |
|
(11,032,929 |
) |
|
(13,517,426 |
) |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
|
Foreign
currency translation adjustment |
|
(1,208,430 |
) |
|
(47,702 |
) |
|
Net loss and comprehensive loss for the
period |
$ |
(12,241,359 |
) |
$ |
(13,565,128 |
) |
|
|
|
|
|
|
|
|
Net loss loss per share, basic and diluted |
$ |
(0.08 |
) |
$ |
(0.12 |
) |
|
Weighted average number of common shares |
|
|
|
|
|
|
outstanding, basic and diluted |
|
133,605,479 |
|
|
111,462,147 |
|
Enthusiast Gaming Holdings Inc. |
|
|
|
|
Condensed Consolidated Interim Statements of Cash
Flows |
|
|
|
For the three months ended March 31, 2022 and
2021 |
|
|
|
|
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
|
|
|
March 31, 2022 |
|
March 31, 2021 |
|
|
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
Net loss for the period |
$ |
(11,032,929 |
) |
$ |
(13,517,426 |
) |
|
Items not
affecting cash: |
|
|
|
|
|
Amortization and depreciation |
|
4,767,024 |
|
|
1,635,854 |
|
|
Share-based compensation |
|
1,386,181 |
|
|
5,760,036 |
|
|
Interest and accretion |
|
1,227,561 |
|
|
274,083 |
|
|
Deferred tax recovery |
|
(526,280 |
) |
|
(79,779 |
) |
|
Foreign exchange (gain) loss |
|
13,458 |
|
|
(696 |
) |
|
Gain on repayment of long-term debt |
|
- |
|
|
(39,502 |
) |
|
Gain on revaluation of deferred payment liability |
|
(1,015,538 |
) |
|
- |
|
|
Shares for services |
|
63,320 |
|
|
93,553 |
|
|
Change in fair value of investment |
|
- |
|
|
(3,984 |
) |
|
Share of (income) loss from investment in associates and joint
ventures |
|
(296,041 |
) |
|
78,418 |
|
|
Changes in
working capital: |
|
|
|
|
|
Changes in trade and other receivables |
|
4,185,031 |
|
|
4,300,825 |
|
|
Changes in prepaid expenses |
|
789,542 |
|
|
(5,623 |
) |
|
Changes in loans receivable |
|
125,995 |
|
|
12,500 |
|
|
Changes in accounts payable and accrued liabilities |
|
(7,236,523 |
) |
|
(6,035,820 |
) |
|
Changes in contract liabilities |
|
(22,668 |
) |
|
239,881 |
|
|
Changes in income tax |
|
107,480 |
|
|
- |
|
|
Income tax paid |
|
(71,016 |
) |
|
- |
|
|
Net cash used in operating activities |
|
(7,535,403 |
) |
|
(7,287,680 |
) |
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
Acquisition
of property and equipment |
|
(1,757 |
) |
|
(3,398 |
) |
|
Net cash used in investing activities |
|
(1,757 |
) |
|
(3,398 |
) |
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
Proceeds
from the issuance of shares for Offering, net of |
|
|
|
|
|
transaction costs |
|
- |
|
|
39,862,514 |
|
|
Proceeds
from long-term debt, net of transaction costs |
|
- |
|
|
944,787 |
|
|
Repayment of
long-term debt |
|
(500,000 |
) |
|
(13,773,470 |
) |
|
Proceeds
from exercise of options |
|
69,820 |
|
|
594,836 |
|
|
Repayment of
other long-term debt |
|
(2,741 |
) |
|
- |
|
|
Lease
payments |
|
(240,001 |
) |
|
(236,614 |
) |
|
Net cash (used in) provided by financing
activities |
|
(672,922 |
) |
|
27,392,053 |
|
|
|
|
|
|
|
|
Foreign
exchange effect on cash |
|
(306,151 |
) |
|
(24,502 |
) |
|
Net change
in cash |
|
(8,516,233 |
) |
|
20,076,473 |
|
|
Cash, beginning of period |
|
22,654,262 |
|
|
4,323,823 |
|
|
Cash, end of period |
$ |
14,138,029 |
|
$ |
24,400,296 |
|
|
|
|
|
|
|
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