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Enthusiast Gaming Announces Second Quarter 2022 Results

·14 min read
Enthusiast Gaming Inc.
Enthusiast Gaming Inc.

Revenue of $51.1 million, up 38%
Gross profit of $15.3 million, up 91%
Gross margin of 30%, up 840 bps

LOS ANGELES, Aug. 15, 2022 (GLOBE NEWSWIRE) -- 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): 1-855-327-6837
International: 1-631-891-4304
Conference 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 Officer
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, 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