EGLX Enthusiast Gaming Holdings Inc

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 and six months ended June 30, 2022.

“During the first half of 2022, we delivered our strongest half-year results to date, led by accelerated revenue growth and substantial gross margin expansion. Q2 2022 was strong, with gross profit up 91% versus Q2 2021, driven by more subscription revenue and higher direct sales with repeat and new customers,” commented Adrian Montgomery, CEO of Enthusiast Gaming. “These results were made possible by the commitment and dedication of our over 250 global staff that make us better each day. As we refine our flywheel model, we continue to unlock new revenue opportunities, while expanding our margin and driving towards near-term profitability.”

Q2 2022 Financial Highlights

• Revenue of $51.1 million, a 38% increase vs revenue of $37.1 million in Q2 2021. The year-over-year increase in revenue was driven by increased direct sales, higher subscription revenue, the acquisitions and growth of the Addicting Games and U.GG properties, and higher RPMs across both web and video.
• Gross profit of $15.3 million, a 91% increase vs gross profit of $8.0 million in Q2 2021, and the highest quarterly gross profit to date.
• Gross margin of 30.0%, an increase of 840 bps vs gross margin of 21.6% in Q2 2021. The increase in gross margin is driven by the increase in direct sales and subscription revenue, and strong performances by Addicting Games and U.GG.
• Direct sales of $9.3 million, a 111% increase vs direct sales of $4.4 million in Q2 2021. Renewals and additional business with existing customers accounted for 71% of direct sales. Direct sales are included in revenue.
• Subscription revenue of $3.5 million, a 75% increase vs subscription revenue of $2.0 million in Q2 2021. The increase in subscription revenue was driven by an increase in paid subscribers and pricing optimization. Paid subscribers were 258,000 as at June 30, 2022, a 66% increase vs paid subscribers of 155,000 as at June 30, 2021.
• On June 2, 2022, the Company settled certain deferred and earn-out payments with a face value of over US$40 million in connection with its acquisitions of Addicting Games, Outplayed, and Vedatis, through the issuance of an aggregate of 16,168,836 common shares at an implied weighted average value of US$2.47 per share.

Q2 2022 Operational Highlights

• Renewals or new business with key notable partners including Adidas, US Navy, StateFarm, HBO Max, Lego, Universal Pictures, P&G, Fanduel, Toyota, Logitech, the FDA and RBC.
• Activated on its partnership with Fractal, an NFT marketplace co-founded by Justin Kan, co-founder of Twitch, resulting in over 3,500 NFTs being minted by the Company and integrated into one of the Company’s HTML5-based games, EV.IO (playable at www.ev.io).
• Continued product advancements including the expansion of the U.GG desktop app, and the introduction of in-game advertising and play-to-earn for certain Addicting Games titles.
• Expansion of Luminosity into new titles including Rocket League, Apex Legends, and Halo.
• Hosted Pocket Gamer Connects Seattle in May, and subsequent to the quarter hosted Pocket Gamer Connects Toronto in July, marking a continued return of live events for the Company.

Industry Update

The Company also congratulates FaZe Holdings Inc. on its recent NASDAQ listing, the completion of which demonstrates investor confidence in the industry. The Company believes an increased number of publicly-traded gaming and esports companies provides investors with useful comparables and additional data points for analysis.

Earnings Announcement and Supplemental Information

Management will host a conference call and webcast on August 15, 2022, at 5:00 p.m. Eastern Time to review and discuss the second quarter 2022 results.

Please call the following numbers to participate:

North America (toll-free): 1-855-327-6837International: 1-631-891-4304Conference ID: 10019972

A live webcast can be heard at https://www.enthusiastgaming.com/investors. 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 and six months ended June 30, 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 Officerinvestor@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 June 30, 2022 and December 31, 2021
(Unaudited - Expressed in Canadian Dollars)
					June 30, 2022			December 31, 2021
	ASSETS
	Current
		Cash		$	14,939,342		$	22,654,262
		Trade and other receivables			32,477,168			33,801,990
		Investments			131,440			131,342
		Loans receivable			50,935			176,931
		Income tax receivable			323,228			356,366
		Prepaid expenses			3,743,564			2,145,184
	Total current assets				51,665,677			59,266,075
	Non-current
		Property and equipment			208,722			247,988
		Right-of-use assets			2,451,209			2,885,662
		Investment in associates and joint ventures			2,113,211			885,269
		Long-term portion of prepaid expenses			266,220			261,922
		Intangible assets			123,689,984			129,138,595
		Goodwill			198,383,073			195,097,659
	Total assets			$	378,778,096		$	387,783,170
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current
		Accounts payable and accrued liabilities		$	41,620,596		$	34,391,221
		Contract liabilities			4,549,149			3,890,569
		Income tax payable			276,464			114,094
		Current portion of long-term debt			2,000,000			2,000,000
		Current portion of deferred payment liability			2,214,036			27,244,146
		Current portion of lease contract liabilities			796,717			796,835
		Current portion of other long-term debt			14,129			11,121
	Total current liabilities				51,471,091			68,447,986
	Non-current
		Long-term debt			6,770,708			7,681,867
		Long-term portion of deferred payment liability			1,060,322			20,794,275
		Long-term lease contract liabilities			1,890,435			2,213,512
		Other long-term debt			138,147			136,324
		Deferred tax liability			25,592,497			25,740,885
	Total liabilities			$	86,923,200		$	125,014,849
	Shareholders' Equity
		Share capital			437,952,908			387,087,948
		Contributed surplus			29,760,268			25,485,361
		Accumulated other comprehensive income			2,387,033			527,166
		Deficit			(178,245,313	)		(150,332,154	)
	Total shareholders' equity				291,854,896			262,768,321
	Total liabilities and shareholders' equity			$	378,778,096		$	387,783,170

Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
For the three and six months ended June 30, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars)				For the three months ended						For the six months ended
				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
	Revenue		$	51,119,028		$	37,057,601		$	98,286,566		$	67,079,936
	Cost of sales			35,775,863			29,038,301			69,452,022			53,129,628
	Gross margin			15,343,165			8,019,300			28,834,544			13,950,308
	Operating expenses
		Professional fees		667,681			1,213,479			1,592,502			1,950,975
		Consulting fees		1,777,003			1,075,726			3,255,177			2,386,353
		Advertising and promotion		427,618			813,588			755,065			1,855,942
		Office and general		2,681,589			2,165,506			4,944,494			2,872,451
		Annual general meeting legal and advisory costs		2,237,200			-			2,237,200			-
		Salaries and wages		9,112,903			5,566,237			17,809,778			10,194,512
		Technology support, web development and content		3,800,203			2,698,660			7,259,071			4,093,543
		Esports player, team and game expenses		1,483,360			1,465,718			2,994,848			2,994,323
		Foreign exchange gain		(633,789	)		(1,066,122	)		(625,202	)		(1,076,255	)
		Share-based compensation		3,128,625			3,958,309			4,514,806			9,718,345
		Amortization and depreciation		4,435,374			1,659,583			9,202,398			3,295,437
	Total operating expenses			29,117,767			19,550,684			53,940,137			38,285,626
	Other expenses (income)
		Transaction costs		114,853			209,129			114,853			209,129
		Share of net (income) loss from investment in associates and joint ventures		(931,901	)		(6,158	)		(1,227,942	)		72,260
		Interest and accretion		1,119,109			480,987			2,549,778			1,272,301
		Loss on settlement of deferred payment liability		3,302,824			-			3,302,824			-
		Gain on player buyouts		(480,537	)		-			(480,537	)		-
		Change in fair value of investment		-			160,655			-			156,671
		Gain on repayment of long-term debt		-			-			-			(39,502	)
		Loss on settlement of vendor-take-back loan		-			316,241			-			316,241
		Loss (gain) on revaluation of deferred payment liability		143,775			89,184			(871,763	)		89,184
		Interest income		(1,320	)		(22,911	)		(2,721	)		(41,231	)
	Net loss before income taxes			(17,041,405	)		(12,758,511	)		(28,490,085	)		(26,370,371	)
	Income taxes
		Current tax expense		196,717			48,692			307,246			34,037
		Deferred tax recovery		(357,892	)		(45,282	)		(884,172	)		(125,061	)
	Net loss for the period			(16,880,230	)		(12,761,921	)		(27,913,159	)		(26,279,347	)
	Other comprehensive income (loss)
	Items that may be reclassified to profit or loss
		Foreign currency translation adjustment		3,068,297			(73,592	)		1,859,867			(121,294	)
	Net loss and comprehensive loss for the period		$	(13,811,933	)	$	(12,835,513	)	$	(26,053,292	)	$	(26,400,641	)
	Net loss loss per share, basic and diluted		$	(0.12	)	$	(0.11	)	$	(0.20	)	$	(0.23	)
	Weighted average number of common shares outstanding, basic and diluted			138,745,383			117,523,027			136,189,630			114,509,330

Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the six months ended June 30, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars)
				June 30, 2022			June 30, 2021
	Cash flows from operating activities
	Net loss for the period		$	(27,913,159	)	$	(26,279,347	)
	Items not affecting cash:
	Amortization and depreciation			9,202,398			3,295,437
	Share-based compensation			4,514,806			9,718,345
	Interest and accretion			2,143,527			465,657
	Deferred tax recovery			(884,172	)		(125,061	)
	Loss on settlement of deferred payment liability			3,302,824			-
	Foreign exchange (gain) loss			(492,716	)		587,716
	Gain on player buyouts			(480,537	)		-
	Gain on repayment of long-term debt			-			(39,502	)
	Loss on settlement of vendor-take-back loan			-			316,241
	(Gain) loss on revaluation of deferred payment liability			(871,763	)		89,184
	Shares for services			84,388			185,662
	Change in fair value of investment			-			156,671
	Share of net (income) loss from investment in associates and joint ventures			(1,227,942	)		72,260
	Changes in working capital:
	Changes in trade and other receivables			1,255,456			375,985
	Changes in prepaid expenses			(1,598,380	)		(3,608,526	)
	Changes in loans receivable			125,995			37,500
	Changes in accounts payable and accrued liabilities			7,128,498			(2,511,575	)
	Changes in contract liabilities			310,858			998,992
	Changes in income tax			174,993			75,753
	Income tax paid			(42,002	)		(281,836	)
	Net cash used in operating activities			(5,266,928	)		(16,470,444	)
	Cash flows from investing activities
	Cash paid for mergers and acquisitions			(2,937,520	)		(12,549,396	)
	Cash acquired from mergers and acquisitions			1,748,602			162,674
	Proceeds from player buyouts, net of transaction costs			480,537			-
	Deferred payment liability			(472,833	)		-
	Acquisition of property and equipment			(4,165	)		(3,398	)
	Net cash used in investing activities			(1,185,379	)		(12,390,120	)
	Cash flows from financing activities
	Proceeds from the issuance of shares for Offerings, net of transaction costs			-			95,183,398
	Proceeds from long-term debt, net of transaction costs			-			944,787
	Repayment of long-term debt			(1,000,000	)		(13,773,470	)
	Proceeds from exercise of options			69,821			784,431
	Repayment of vendor-take-back loan			-			(6,158,329	)
	Repayment of other long-term debt			(2,826	)		-
	Lease payments			(417,092	)		(392,175	)
	Net cash (used in) provided by financing activities			(1,350,097	)		76,588,642
	Foreign exchange effect on cash			87,484			(684,328	)
	Net change in cash			(7,714,920	)		47,043,750
	Cash, beginning of period			22,654,262			4,323,823
	Cash, end of period		$	14,939,342		$	51,367,573