Enthusiast Gaming Reports Second Quarter 2023 Results
- Strategic focus on higher margin revenue streams such as Brand Solutions and subscriptions led to a 520 basis points year-over-year expansion in gross margins.
- Repeat customers in Brand Solutions accounted for 62% of deals and 66% of Brand Solutions revenue, indicating a strong customer base.
- The company maintains the largest audience in the gaming ecosystem, providing a solid platform for sustainable growth.
- Secured renewals and new business with notable advertisers, including Coca-Cola, XBOX, and Paramount Pictures, showcasing strong partnerships and revenue diversification.
- The net loss of $10.2 million in Q2 2023 reflects the short-term impact of de-emphasizing non-core and unprofitable revenue streams.
- Revenue decreased to $42.6 million in Q2 2023 compared to $51.1 million in Q2 2022, signaling a need for continued efforts to improve revenue generation.
Strategic Focus On Cross-Platform Offerings and Brand Solutions Driving Improved Revenue Mix and Higher Gross Margins Year-over-Year
LOS ANGELES, Aug. 14, 2023 (GLOBE NEWSWIRE) -- Enthusiast Gaming Holdings Inc. (“Enthusiast Gaming” or the “Company”) (NASDAQ: EGLX; TSX: EGLX), a leading gaming media and entertainment company, today announced financial results for the three and six months ended June 30, 2023 (“Q2 2023”).
Q2 2023 Financial Highlights
- Revenue was
$42.6 million in Q2 2023 compared to$51.1 million in Q2 2022. The decrease was concentrated in low-margin revenue streams, reflecting the lower CPMs in the programmatic ad market and the strategic focus on higher margin revenue. - Gross profit was
$15.0 million , with margins expanding 520 basis points year-over-year to35.2% . - Brand Solutions revenue of
$8.7 million and subscription revenue of$4.0 million combined for nearly30% of total revenue in Q2 2023, compared to approximately25% in Q2 2022. Repeat customers in Brand Solutions accounted for62% of deals and66% of Brand Solutions revenue. - Ended the quarter with
$2.7 million of cash along with an unused operating facility of$5.0 million , for total available cash of$7.7 million as at June 30, 2023.
“Our strategic initiatives, which are focused on diversifying revenue and expanding margins to move us toward near-term profitability, continue to take hold,” commented Nick Brien, Chief Executive Officer. “The underlying trends of our business are highly encouraging, suggesting significant improvements in our consolidated results in the second half of 2023 and into 2024. First, we are growing our higher yield and higher margin revenue, including Brand Solutions, subscriptions, and events, which increased to
“At the same time, we made the decision to de-emphasize non-core and unprofitable revenue, including ending our relationship with certain unprofitable creator channels, impacting revenue in the short-term but driving a significant improvement in our gross margins year-over-year,” continued Brien. “We are also investing in profitable growth streams for the Company, including our popular U.GG, Icy-Veins, and The Sims Resource products, and expect these investments to drive improved performance in the second half of the year.”
“We maintain the largest audience in the gaming ecosystem according to Comscore, creating an enviable platform for sustainable growth,” added Brien. “With the start-up costs for our NFL TNG partnership already behind us, we expect the second season of NFL TNG will deliver higher margins and continued growth. Based on the success of the NFL TNG partnership, we are in active discussions with other professional sports leagues. We have also planned a robust slate of high-margin live events during the second half of the year. Combined with incremental improvements in our CPMs and additional direct sale partnerships, our expectations of achieving profitability are coming into clear focus.”
Q2 2023 Operational Highlights
- Secured renewals and new additional business with key notable advertisers including Coca-Cola, XBOX, Netease, Paramount Pictures, Universal Pictures, Pokerstars, Nickelodeon, LEGO, US Navy, Toyota, Nintendo US, KFC, State Farm, Shell, and Best Buy. Renewals and additional business with existing customers accounted for
66% of Brand Solutions revenue in Q2 2023. - Pocket Gamer Connects (PGC), the Company’s B2B gaming events platform, drew attendance of around 700 participants at its Seattle event. Additionally, PGC’s first-ever event in Dubai, GameExpo Summit, not only expanded its global footprint, but also enhanced our leadership in the growing MENA market, with more than 1,300 attendees from more than 60 countries.
- Luminosity Gaming, the Company’s esports division, won 11 championships in Q2 2023. Additionally, aligned with our commitment to diversity and inclusion, Luminosity Gaming formed two new all-female teams: Luminosity Gaming Red and Luminosity Gaming Green which compete in Apex Legends.
- U.GG, the Company’s data-driven and insights platform for League of Legends, recently expanded to include content and support for World of Warcraft (WoW), one of the largest massive multiplayer online role-playing (MMORPG) games in the world.
- Icy Veins, the Company’s strategy and guide platform for popular Activision-Blizzard game titles, including WoW, recently expanded to include Diablo IV.
- Paid subscribers were 272,000 at June 30, 2023, a
1% decrease from 275,000 at March 31, 2023 and5% increase from 258,000 at June 30, 2022, while revenue per subscriber increased on both a quarter-on-quarter and year-over-year basis. - The Company extended its position as the #1 Gaming Property for unique visitor traffic in the United States, reaching a new record of 56 million Unique Visitors, based on the latest digital media ratings from Comscore. The results represent
28% year-over-year growth in Unique Visitor traffic to Enthusiast Gaming’s digital media Property of gaming communities, content, and creators (Comscore Media Metrix® Multi-Platform, Total Audience, May 2023, U.S.).
Second Quarter 2023 Results Comparison
Revenue was
Gross profit decreased
Net loss was
As of June 30, 2023, the Company’s cash balance was
Organizational Updates
In June, 2023, Shinggo Lu was promoted to Chief Product Officer and Alan Liang was promoted to Chief Technology Officer. Shinggo and Alan are the founders of U.GG, the Company’s data-driven and insights platform focused in League of Legends and recently expanded into World of Warcraft. U.GG joined the family of Enthusiast Gaming in 2021.
Conference Call
Management will host a conference call and webcast on August 14, 2023, at 5 p.m. ET to review and discuss its Q2 2023 results. Conference call details:
- Toll Free: 1-855-239-1101 (Conference ID: 10180990)
- Live webcast: https://viavid.webcasts.com/starthere.jsp?ei=1624985&tp_key=d1ab3c44a1
A replay of the webcast will be available on the Investor page of the Enthusiast Gaming website at enthusiastgaming.com/investors.
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 and six months ended June 30, 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 a leading gaming media and entertainment company, building the largest platform for video game enthusiasts and esports fans to connect and compete worldwide. Combining the elements of its five core pillars: creators, content, communities, games, and experiences, Enthusiast Gaming provides a unique opportunity for marketers to create integrated brand solutions to connect with coveted Gen Z 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 scale and diversity of gaming enthusiasts today.
Investor Contacts
Enthusiast Gaming – Alex Macdonald, Chief Financial Officer
FNK IR – Rob Fink / Matt Chesler, CFA
investor@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, 2023 and December 31, 2022 | ||||||||||
(Unaudited - Expressed in Canadian Dollars) | ||||||||||
June 30, 2023 | December 31, 2022 | |||||||||
ASSETS | ||||||||||
Current | ||||||||||
Cash | $ | 2,741,788 | $ | 7,415,516 | ||||||
Trade and other receivables | 32,645,717 | 37,868,107 | ||||||||
Investments | 125,000 | 125,000 | ||||||||
Loans receivable | - | 50,935 | ||||||||
Income tax receivable | - | 367,092 | ||||||||
Prepaid expenses | 1,280,633 | 2,017,004 | ||||||||
Total current assets | 36,793,138 | 47,843,654 | ||||||||
Non-current | ||||||||||
Property and equipment | 157,427 | 180,621 | ||||||||
Right-of-use assets | 1,605,459 | 2,099,996 | ||||||||
Investment in associates and joint ventures | 2,383,861 | 2,450,031 | ||||||||
Long-term portion of prepaid expenses | 273,533 | 279,814 | ||||||||
Intangible assets | 110,461,565 | 116,967,438 | ||||||||
Goodwill | 170,168,930 | 171,615,991 | ||||||||
Total assets | $ | 321,843,913 | $ | 341,437,545 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Current | ||||||||||
Accounts payable and accrued liabilities | $ | 35,797,853 | $ | 32,823,320 | ||||||
Contract liabilities | 4,902,397 | 5,380,378 | ||||||||
Income tax payable | 242,785 | 129,485 | ||||||||
Current portion of long-term debt | 4,352,940 | 17,431,625 | ||||||||
Current portion of deferred payment liability | 79,205 | 2,391,863 | ||||||||
Current portion of lease liabilities | 870,447 | 872,429 | ||||||||
Current portion of other long-term debt | 9,678 | 10,891 | ||||||||
Total current liabilities | 46,255,305 | 59,039,991 | ||||||||
Non-current | ||||||||||
Long-term debt | 10,891,725 | - | ||||||||
Long-term portion of deferred payment liability | 1,612,364 | 1,451,939 | ||||||||
Long-term lease liabilities | 1,039,764 | 1,478,438 | ||||||||
Other long-term debt | 141,141 | 144,844 | ||||||||
Deferred tax liability | 23,729,627 | 24,671,326 | ||||||||
Total liabilities | $ | 83,669,926 | $ | 86,786,538 | ||||||
Shareholders' Equity | ||||||||||
Share capital | 444,474,076 | 442,781,376 | ||||||||
Contributed surplus | 33,321,563 | 30,402,742 | ||||||||
Accumulated other comprehensive income | 6,494,599 | 8,629,848 | ||||||||
Deficit | (246,116,251 | ) | (227,162,959 | ) | ||||||
Total shareholders' equity | 238,173,987 | 254,651,007 | ||||||||
Total liabilities and shareholders' equity | $ | 321,843,913 | $ | 341,437,545 | ||||||
Enthusiast Gaming Holdings Inc. | |||||||||||||||
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss | |||||||||||||||
For the three and six months ended June 30, 2023 and 2022 | |||||||||||||||
(Unaudited - Expressed in Canadian Dollars) | |||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | ||||||||||||
Revenue | $ | 42,598,769 | $ | 51,119,028 | $ | 85,478,735 | $ | 98,286,566 | |||||||
Cost of sales | 27,616,077 | 35,775,863 | 53,730,485 | 69,452,022 | |||||||||||
Gross margin | 14,982,692 | 15,343,165 | 31,748,250 | 28,834,544 | |||||||||||
Operating expenses | |||||||||||||||
Professional fees | 690,063 | 667,681 | 1,143,399 | 1,592,502 | |||||||||||
Consulting fees | 1,595,468 | 1,777,003 | 2,903,952 | 3,255,177 | |||||||||||
Advertising and promotion | 938,613 | 427,618 | 2,394,724 | 755,065 | |||||||||||
Office and general | 1,930,338 | 2,681,589 | 4,222,121 | 4,944,494 | |||||||||||
Annual general meeting legal and advisory costs | - | 2,237,200 | - | 2,237,200 | |||||||||||
Salaries and wages | 9,932,310 | 9,112,903 | 19,139,334 | 17,809,778 | |||||||||||
Technology support, web development and content | 4,156,966 | 3,800,203 | 9,452,990 | 7,259,071 | |||||||||||
Esports player, team and game expenses | 645,715 | 1,483,360 | 1,281,162 | 2,994,848 | |||||||||||
Foreign exchange loss (gain) | 22,851 | (633,789 | ) | 137,408 | (625,202 | ) | |||||||||
Share-based compensation | 1,788,490 | 3,128,625 | 2,918,821 | 4,514,806 | |||||||||||
Amortization and depreciation | 2,886,075 | 4,435,374 | 6,224,098 | 9,202,398 | |||||||||||
Total operating expenses | 24,586,889 | 29,117,767 | 49,818,009 | 53,940,137 | |||||||||||
Other expenses (income) | |||||||||||||||
Transaction costs | - | 114,853 | - | 114,853 | |||||||||||
Share of net (income) loss from investment in associates and joint ventures | (106,277 | ) | (931,901 | ) | 66,170 | (1,227,942 | ) | ||||||||
Interest and accretion | 605,385 | 1,119,109 | 1,215,725 | 2,549,778 | |||||||||||
Loss on settlement of deferred payment liability | - | 3,302,824 | - | 3,302,824 | |||||||||||
Loss (gain) on revaluation of deferred payment liability | 374,101 | 143,775 | 202,077 | (871,763 | ) | ||||||||||
Gain on player buyouts | - | (480,537 | ) | - | (480,537 | ) | |||||||||
Interest income | (1,514 | ) | (1,320 | ) | (62,721 | ) | (2,721 | ) | |||||||
Net loss before income taxes | (10,475,892 | ) | (17,041,405 | ) | (19,491,010 | ) | (28,490,085 | ) | |||||||
Income taxes | |||||||||||||||
Current tax expense | 22,279 | 196,717 | 225,771 | 307,246 | |||||||||||
Deferred tax recovery | (281,579 | ) | (357,892 | ) | (763,489 | ) | (884,172 | ) | |||||||
Net loss for the period | (10,216,592 | ) | (16,880,230 | ) | (18,953,292 | ) | (27,913,159 | ) | |||||||
Other comprehensive (loss) income | |||||||||||||||
Items that may be reclassified to profit or loss | |||||||||||||||
Foreign currency translation adjustment | (2,141,800 | ) | 3,068,297 | (2,135,249 | ) | 1,859,867 | |||||||||
Net loss and comprehensive loss for the period | $ | (12,358,392 | ) | $ | (13,811,933 | ) | $ | (21,088,541 | ) | $ | (26,053,292 | ) | |||
Net loss per share, basic and diluted | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.12 | ) | $ | (0.20 | ) | |||
Weighted average number of common shares | |||||||||||||||
outstanding, basic and diluted | 152,171,249 | 138,745,383 | 151,970,362 | 136,189,630 | |||||||||||
Enthusiast Gaming Holdings Inc. | |||||||||
Condensed Consolidated Interim Statements of Cash Flows | |||||||||
For the six months ended June 30, 2023 and 2022 | |||||||||
(Unaudited - Expressed in Canadian Dollars) | |||||||||
June 30, 2023 | June 30, 2022 | ||||||||
Cash flows from operating activities | |||||||||
Net loss for the period | $ | (18,953,292 | ) | $ | (27,913,159 | ) | |||
Items not affecting cash: | |||||||||
Amortization and depreciation | 6,224,098 | 9,202,398 | |||||||
Share-based compensation | 2,918,821 | 4,514,806 | |||||||
Interest and accretion | 137,327 | 2,143,527 | |||||||
Deferred tax recovery | (763,489 | ) | (884,172 | ) | |||||
Share of net loss (income) from investment in associates and joint ventures | 66,170 | (1,227,942 | ) | ||||||
Loss on settlement of deferred payment liability | - | 3,302,824 | |||||||
Loss (gain) on revaluation of deferred payment liability | 202,077 | (871,763 | ) | ||||||
Foreign exchange loss (gain) | 24,480 | (492,716 | ) | ||||||
Gain on player buyouts | - | (480,537 | ) | ||||||
Shares for services | - | 84,388 | |||||||
Provisions | 165,145 | - | |||||||
Changes in working capital: | |||||||||
Changes in trade and other receivables | 5,108,139 | 1,255,456 | |||||||
Changes in prepaid expenses | 736,371 | (1,598,380 | ) | ||||||
Changes in loans receivable | - | 125,995 | |||||||
Changes in accounts payable and accrued liabilities | 2,974,533 | 7,128,498 | |||||||
Changes in contract liabilities | (477,981 | ) | 310,858 | ||||||
Changes in income tax | 594,894 | 174,993 | |||||||
Income tax paid | (114,502 | ) | (42,002 | ) | |||||
Net cash used in operating activities | (1,157,209 | ) | (5,266,928 | ) | |||||
Cash flows from investing activities | |||||||||
Cash paid for mergers and acquisitions | - | (2,937,520 | ) | ||||||
Cash acquired from mergers and acquisitions | - | 1,748,602 | |||||||
Proceeds from player buyouts, net of transaction costs | - | 480,537 | |||||||
Repayment of deferred payment liability | (844,350 | ) | (472,833 | ) | |||||
Acquisition of intangible assets | (27,488 | ) | - | ||||||
Acquisition of property and equipment | (17,156 | ) | (4,165 | ) | |||||
Net cash used in investing activities | (888,994 | ) | (1,185,379 | ) | |||||
Cash flows from financing activities | |||||||||
Repayment of long-term debt | (2,176,470 | ) | (1,000,000 | ) | |||||
Proceeds from exercise of options | - | 69,821 | |||||||
Repayment of other long-term debt | (6,775 | ) | (2,826 | ) | |||||
Lease payments | (439,184 | ) | (417,092 | ) | |||||
Net cash used in financing activities | (2,622,429 | ) | (1,350,097 | ) | |||||
Foreign exchange effect on cash | (5,096 | ) | 87,484 | ||||||
Net change in cash | (4,673,728 | ) | (7,714,920 | ) | |||||
Cash, beginning of period | 7,415,516 | 22,654,262 | |||||||
Cash, end of period | $ | 2,741,788 | $ | 14,939,342 | |||||
FAQ
What were Enthusiast Gaming's Q2 2023 revenue highlights?
What led to the net loss in Q2 2023?
Which notable advertisers renewed business with Enthusiast Gaming in Q2 2023?