Enthusiast Gaming Holdings Inc. (“Enthusiast Gaming” or the
“Company”) (TSX: EGLX), a leading gaming media and
entertainment company, today announced financial results for the
three months ended March 31, 2024 (“Q1 2024”).
“The cornerstone of Enthusiast Gaming has always
been, and remains, the strength of its owned and operated assets.
Assets like TheSimsResource, U.GG, Icy-Veins, PocketGamer,
Luminosity Gaming, NFL Tuesday Night Gaming, and our many other
assets and properties that boast large, coveted, and highly engaged
gaming audiences,” commented Adrian Montgomery, Board Chair and
interim CEO of Enthusiast Gaming. “During and subsequent to the
first quarter, the team has been hard at work, delivering much
needed focus, stability, and excitement to the business, including
streamlining the Company’s cost structure, executing significant
product advancements across our asset portfolio, expanding our key
strategic partnerships, including the signing of a new sports
league, and the divestment of certain non-core, non-profitable
legacy assets, bolstering the Company’s balance sheet.”
“On the back of all of these changes,”
Montgomery continued, “we have reported our best quarterly Adjusted
EBITDA in company history, in our seasonally slowest quarter of the
year, and having only initiated our cost savings program in March
of this year. These results indicate a clear path to scalable and
sustainable profitability in 2024, positioning us for a return to
growth.”
Financial Highlights for Q1
2024
- Revenue of $23.3 million, compared
to $42.9 million in Q1 2023, with the majority of the decline being
related to lower margin revenue attributable to the video
platform.
- Gross profit of $14.1 million,
compared to $16.8 million in Q1 2023, with gross margin expanding
to 60.3% from 39.1%.
- Operating expenses of $15.5
million, a $9.7 million year-over-year decrease from $25.2 million
in Q1 2023.
- Adjusted EBITDA loss of $1.8
million, a $1.3 million improvement compared to $3.1 million in Q1
2023, resulting from the successful implementation of certain cost
savings measures and the deprioritization of certain business
activities, mitigating the related decline in revenue.
- Net loss and comprehensive loss of
$1.3 million in Q1 2024 compared to a net loss and comprehensive
loss of $8.7 million in Q1 2023.
Business Highlights for Q1
2024
- The Company announced a $10 million
cost reduction program to be primarily driven by efficiencies in ad
tech, the insourcing of production and content resources, headcount
reductions and other areas, which was principally executed in Q1
2024.
- Direct sales (included in revenue)
for Q1 2024, was $6.6 million as compared to approximately $10.0
million for Q1 2023, as a result of the timing of advertising
spends associated with certain consumer product goods clients
period-over-period as well as macroeconomic impacts on the
technology/telecommunication industry.
- The Company amplified its focus on
its highly engaged communities, resulting in a 23% increase in
aggregate pageviews in Q1 2024 as compared to Q4 2023 and,
excluding the impact of the video platform, a 60% year-over-year
increase in time spent per unique visitor.
- The Company made a number of
expansions to its product and entertainment offerings, including
U.GG’s expansion into Riot Game’s title Teamfight Tactics,
Icy-Veins expansion into Last Epoch, PocketGamer Connects hosting
its largest ever event in London in January and an inaugural event
in San Francisco in March, and Luminosity expanding its presence to
New York hosting Luminosity Makes Big Moves with over 57,000 peak
concurrent viewers
- The Company entered into a
multi-year partnership with Playwire, a leading advertising
technology provider, to outsource its ad tech stack and amplify its
monetization opportunities across its communities.
- The previously announced sale of
certain non-core, non-profitable casual gaming assets for a
purchase price of approximately US$3.0 million closed on April 15,
2024, helping strengthen the balance sheet.
- The Company expanded its sports
league partnerships, including entering into a strategic
partnership with an additional major US sports league, further
details of which will be announced closer to the launch of the
program.
- The Company concluded Season 2 of
NFL TNG, with Season 2 achieving a 52% increase in total
impressions as compared to Season 1. Total impressions for Season 2
were 111 million, averaging over 5 million per week.
“We are working swiftly to provide sustainable
and scalable profitability for the Company, and delivering the
lowest quarter of Adjusted EBITDA losses in Q1 2024 shows our
commitment to do just that. We continue to be committed to growth
and focusing on higher gross margin revenue lines like direct
sales, subscription and programmatic across our owned and operated
sites.” said Felicia DellaFortuna, CFO of Enthusiast Gaming.
First Quarter 2024 Results
Comparison
Revenue was $23.3 million in Q1 2024, a 46%
decrease compared to $42.9 million in Q1 2023. Media and Content
revenue was $15.9 million in Q1 2024, a 55% decrease from $35.5
million in Q1 2023. Esports and Entertainment revenue and
Subscription revenue remained consistent in Q1 2024 compared to Q1
2023 at $3.4 million and $4.0 million, respectively. During Q1
2024, the Company experienced lower views on its video platforms
due to the strategic decision to de-prioritize the lower margin
video platform revenue which yielded the vast majority of the
decline in Media and Content revenue in Q1 2024 compared to Q1
2023. Direct Sales (the majority of which is included in media and
content revenue) decreased by $3.4 million to $6.6 million in Q1
2024 as compared to $10.0 million in Q1 2023. This is a result of
the timing of advertising spends associated with certain consumer
product goods clients year-over-year as well as macroeconomic
impacts on the technology/telecommunication industry.
Gross profit was $14.1 million in Q1 2024, a 16%
decrease compared to the $16.8 million in Q1 2023. Gross margin
increased to 60.3% in Q1 2024 from 39.1% in Q1 2023.
Adjusted EBITDA loss was $1.8 million in Q1 2024
compared to an Adjusted EBITDA loss of $3.1 million in Q1 2023.
Net loss and comprehensive loss was $1.3
million, or $(0.01) per share, in Q1 2024, compared to $8.7
million, or $(0.06) per share, in Q1 2023.
Organizational Updates
The Company is pleased to announce that Mr. John
Zorbas has been appointed to the Board of Directors of the Company,
effective May 15, 2024. Mr. Zorbas is currently the CEO, President
and director of Captor Capital Corp. and serves on the board of
directors of numerous Canadian and UK-based public companies. Mr.
Zorbas brings extensive capital markets and public company
experience that will make him a valuable addition to the Board.
Investor Conference Call
Management will host a conference call and
webcast on Wednesday, May 15, 2024, at 5 p.m. ET to review and
discuss its Q1 2024 results. Conference call details:
- Dial-in: 1-855-239-1101 (Conference
ID: 10189020)
- Live webcast:
https://viavid.webcasts.com/starthere.jsp?ei=1670082&tp_key=fa58616338
A replay will be available on Enthusiast
Gaming’s website at enthusiastgaming.com/investors.
Supplemental Information
Enthusiast Gaming’s financial statements and
management discussion and analysis (“MD&A”) are available at
www.sedarplus.ca and enthusiastgaming.com/investors. 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.
Contacts
Enthusiast Gaming: Felicia DellaFortuna, Chief Financial
OfficerInvestors: investor@enthusiastgaming.comMedia:
press@enthusiastgaming.com
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.sedarplus.ca. 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.
Non-IFRS Measures
This press release references certain non-IFRS
measures, including Adjusted EBITDA, as described below. These
non-IFRS measures are not recognized measures under IFRS and do not
have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these measures are provided as additional
information to complement those IFRS measures by providing further
understanding of the Company’s results of operations from
management’s perspective. Accordingly, these measures should not be
considered in isolation nor as a substitute for analysis of the
Company’s financial information reported under IFRS.
The Company uses non-IFRS measures including:
“EBITDA”, which is defined as earnings before
interest, taxes, depreciation and amortization. Enthusiast Gaming
calculates EBITDA using gross margin less total operating expenses
plus share-based compensation, amortization and depreciation and
annual general meeting legal and advisory costs; and,
“Adjusted EBITDA”, which is defined as EBITDA
plus severance and other non-recurring public costs. Non-recurring
costs include items such as annual Nasdaq listing fees and
directors and officers (“D&O”) liability insurance specific to
the Company’s former listing on Nasdaq.
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.
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss |
For the three months ended March 31, 2024 and
2023 |
(Unaudited - Expressed in Canadian Dollars) |
|
For the three months ended |
|
March 31, 2024 |
March 31, 2023 |
|
|
|
|
|
|
|
Revenue |
$ |
23,328,239 |
|
$ |
42,879,966 |
|
Cost of sales |
|
9,252,080 |
|
|
26,114,408 |
|
Gross margin |
|
14,076,159 |
|
|
16,765,558 |
|
Operating expenses |
|
|
|
|
|
|
Professional fees |
|
552,558 |
|
|
453,336 |
|
Consulting fees |
|
1,452,236 |
|
|
1,308,484 |
|
Advertising and promotion |
|
479,804 |
|
|
1,456,111 |
|
Office and general |
|
994,398 |
|
|
2,291,783 |
|
Salaries and wages |
|
8,346,301 |
|
|
9,207,024 |
|
Technology support, web development and content |
|
4,268,659 |
|
|
5,296,024 |
|
Esports player, team and game expenses |
|
609,112 |
|
|
635,447 |
|
Foreign exchange loss |
|
105,935 |
|
|
114,557 |
|
Share-based compensation |
|
(1,998,257 |
) |
|
1,130,331 |
|
Amortization and depreciation |
|
715,494 |
|
|
3,338,023 |
|
Total operating expenses |
|
15,526,240 |
|
|
25,231,120 |
|
|
|
|
|
|
|
|
Other expenses (income) |
|
|
|
|
|
|
Share of net (income) loss from investment in associates and joint
ventures |
|
(25,382 |
) |
|
172,447 |
|
Interest and accretion |
|
623,214 |
|
|
610,340 |
|
Gain on revaluation of deferred payment liability |
|
(16,900 |
) |
|
(172,024 |
) |
Interest income |
|
(5,053 |
) |
|
(61,207 |
) |
Net loss before income taxes |
|
(2,025,960 |
) |
|
(9,015,118 |
) |
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
|
Current tax expense |
|
102,583 |
|
|
203,492 |
|
Deferred tax expense (recovery) |
|
173,204 |
|
|
(481,910 |
) |
Net loss for the period |
|
(2,301,747 |
) |
|
(8,736,700 |
) |
|
|
|
|
|
|
|
Other comprehensive (loss) income |
|
|
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
|
Foreign currency translation adjustment |
|
986,126 |
|
|
6,551 |
|
Net loss and comprehensive loss for the
period |
$ |
(1,315,621 |
) |
$ |
(8,730,149 |
) |
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
$ |
(0.01 |
) |
$ |
(0.06 |
) |
Weighted average number of common shares outstanding,
basic and diluted |
|
155,678,040 |
|
|
151,767,243 |
|
|
|
|
|
|
|
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Financial
Position |
As of March 31, 2024 and December 31, 2023 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
Current |
|
|
|
|
Cash |
$ |
1,719,082 |
|
$ |
6,851,966 |
|
Trade and other receivables |
|
14,617,101 |
|
|
31,502,732 |
|
Income tax receivable |
|
13,694 |
|
|
31,251 |
|
Prepaid expenses |
|
896,722 |
|
|
1,820,144 |
|
Assets held for sale |
|
3,797,408 |
|
|
- |
|
Total current assets |
|
21,044,007 |
|
|
40,206,093 |
|
Non-current |
|
|
|
|
Property and equipment |
|
111,838 |
|
|
124,640 |
|
Right-of-use assets |
|
1,257,305 |
|
|
1,441,149 |
|
Investment in associates and joint ventures |
|
2,914,112 |
|
|
2,888,730 |
|
Long-term portion of prepaid expenses |
|
186,569 |
|
|
182,108 |
|
Intangible assets |
|
81,687,652 |
|
|
85,421,227 |
|
Goodwill |
|
106,561,487 |
|
|
105,868,081 |
|
Total assets |
$ |
213,762,970 |
|
$ |
236,132,028 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
Current |
|
|
|
|
Accounts payable and accrued liabilities |
$ |
30,350,609 |
|
$ |
47,101,272 |
|
Contract liabilities |
|
3,889,364 |
|
|
6,078,950 |
|
Income tax payable |
|
344,615 |
|
|
274,924 |
|
Current portion of long-term debt |
|
21,622,374 |
|
|
21,888,597 |
|
Current portion of deferred payment liability |
|
85,098 |
|
|
82,231 |
|
Current portion of lease liabilities |
|
731,652 |
|
|
740,212 |
|
Current portion of other long-term debt |
|
12,877 |
|
|
9,668 |
|
Total current liabilities |
|
57,036,589 |
|
|
76,175,854 |
|
Non-current |
|
|
|
|
Long-term portion of deferred payment liability |
|
2,099,935 |
|
|
2,083,262 |
|
Long-term lease liabilities |
|
796,054 |
|
|
938,845 |
|
Other long-term debt |
|
143,798 |
|
|
140,613 |
|
Deferred tax liability |
|
14,283,798 |
|
|
14,076,780 |
|
Total liabilities |
$ |
74,360,174 |
|
$ |
93,415,354 |
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
Share capital |
|
452,994,596 |
|
|
444,474,076 |
|
Contributed surplus |
|
25,358,412 |
|
|
35,877,189 |
|
Accumulated other comprehensive income |
|
8,188,102 |
|
|
7,201,976 |
|
Deficit |
|
(347,138,314 |
) |
|
(344,836,567 |
) |
Total shareholders' equity |
|
139,402,796 |
|
|
142,716,674 |
|
Total liabilities and shareholders' equity |
$ |
213,762,970 |
|
$ |
236,132,028 |
|
|
|
|
|
|
Enthusiast Gaming Holdings Inc. |
Condensed Consolidated Interim Statements of Cash
Flows |
For the three months March 31, 2024 and 2023 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
March 31, 2024 |
|
March 31, 2023 |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Net loss for the period |
$ |
(2,301,747 |
) |
$ |
(8,736,700 |
) |
Items not affecting cash: |
|
|
|
|
Amortization and depreciation |
|
715,494 |
|
|
3,338,023 |
|
Share-based compensation |
|
(1,998,257 |
) |
|
1,130,331 |
|
Accretion |
|
10,296 |
|
|
83,480 |
|
Deferred tax expense (recovery) |
|
173,204 |
|
|
(481,910 |
) |
Share of net (income) loss from investment in associates and joint
ventures |
|
(25,382 |
) |
|
172,447 |
|
Gain on revaluation of deferred payment liability |
|
(16,900 |
) |
|
(172,024 |
) |
Foreign exchange gain |
|
(310,997 |
) |
|
(1,691 |
) |
Gain on settlement of accounts payable |
|
(622,413 |
) |
|
- |
|
Provisions |
|
241,066 |
|
|
159,250 |
|
Changes in working capital: |
|
|
|
|
Changes in trade and other receivables |
|
16,644,565 |
|
|
5,793,769 |
|
Changes in prepaid expenses |
|
924,542 |
|
|
542,369 |
|
Changes in accounts payable and accrued liabilities |
|
(16,128,250 |
) |
|
(4,105,906 |
) |
Changes in contract liabilities |
|
(2,189,586 |
) |
|
(644,729 |
) |
Changes in income tax |
|
110,400 |
|
|
439,202 |
|
Income tax paid |
|
(23,152 |
) |
|
(115,201 |
) |
Net cash used in operating activities |
|
(4,797,117 |
) |
|
(2,599,290 |
) |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Acquisition of intangible assets |
|
- |
|
|
(27,488 |
) |
Acquisition of property and equipment |
|
(994 |
) |
|
(18,531 |
) |
Net cash used in investing activities |
|
(994 |
) |
|
(46,019 |
) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from long-term debt |
|
496,252 |
|
|
- |
|
Repayment of long-term debt |
|
(717,608 |
) |
|
(1,088,235 |
) |
Repayment of other long-term debt |
|
- |
|
|
(2,968 |
) |
Lease payments |
|
(208,370 |
) |
|
(265,523 |
) |
Net cash used in financing activities |
|
(429,726 |
) |
|
(1,356,726 |
) |
|
|
|
|
|
Foreign exchange effect on cash |
|
94,953 |
|
|
53,428 |
|
Net change in cash |
|
(5,132,884 |
) |
|
(3,948,607 |
) |
Cash, beginning of period |
|
6,851,966 |
|
|
7,415,516 |
|
Cash, end of period |
$ |
1,719,082 |
|
$ |
3,466,909 |
|
|
|
|
|
|
Enthusiast Gaming Holdings Inc. |
EBITDA and Adjusted EBITDA |
For the three months ended March 31, 2024 and
2023 |
(Unaudited - Expressed in Canadian Dollars) |
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, 2024 |
|
March 31, 2023 |
|
|
|
|
|
Gross margin |
$ |
14,076,159 |
|
$ |
16,765,558 |
|
Operating expenses |
|
(15,526,240 |
) |
|
(25,231,120 |
) |
Share-based compensation |
|
(1,998,257 |
) |
|
1,130,331 |
|
Amortization and depreciation |
|
715,494 |
|
|
3,338,023 |
|
EBITDA |
|
(2,732,844 |
) |
|
(3,997,208 |
) |
Severance |
|
584,198 |
|
|
60,985 |
|
Listing fees & D&O insurance specific to the
Company's Nasdaq listing |
|
379,035 |
|
|
881,238 |
|
Adjusted EBITDA |
|
(1,769,611 |
) |
|
(3,054,985 |
) |
|
|
|
|
|
|
|
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