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Esports Entertainment Group Reports Fourth Quarter and Fiscal Year 2021 Results

·14 min read

Q4 revenue up 63% over Q3 to $8.8 million

$16.8 million revenue generated for fiscal year 2021

Stockholders’ equity increased to $74.8M, up $63.4M over FY20

Company reaffirms FY22 revenue guidance of $100M to $105M

Newark, New Jersey--(Newsfile Corp. - October 13, 2021) - Esports Entertainment Group, Inc. (NASDAQ: GMBL) (NASDAQ: GMBLW) (or the "Company") today announced financial results for its fourth quarter and fiscal year ended June 30, 2021.

Fiscal Fourth Quarter 2021 and Recent Operational Highlights

  • Completed acquisitions of Helix eSports and ggCircuit

  • Completed acquisition of BetHard, the B2C business of Gameday Group, adding Swedish and Spanish gaming licenses and substantially increasing revenue base

  • New Jersey gaming license formally accepted by NJ Division of Gaming Enforcement in May 2021

  • Opened New Jersey office and expanded hiring ahead of VIE US launch

  • Completed $35 million private placement of convertible notes with $17.50 conversion price

  • Partnered with Square, the world-leading point of sale and payment processing provider, to integrate its payment solution into ggLeap, a premium esports center management software

  • Partnered with Game Fund Partners to become a part of their venture capital arm and a new planned $300 million game fund

  • Continued to expand partnerships with professional sports teams, becoming official tournament sponsor for the Cleveland Cavaliers, New York Rangers, Indianapolis Colts, Tampa Bay Buccaneers, LA Chargers, and LAFC

  • Partnered with Pro Football Retired Players Association, a national membership organization that develops benefits and programs for retired NFL players, to be its official esports partner and tournament provider

  • Partnered with Hall of Fame Resort and Entertainment Company to become the official esports provider for the Hall of Fame Village powered by Johnson Controls, joining Topgolf Swing Suites and Don Shula's among others

  • Signed agreement with Associated Students of UCLA to launch state-of-the-art Helix eSports gaming facility inside Ackerman Union, located in the heart of UCLA's campus

  • Launched crypto mining application at ggCircuit enabled LAN centers

  • Launched "pay-and-play" casino brand targeting the Finnish gaming market

  • Partnered with Indian Gaming Esports Association and Spectrum Gaming to bring esports to tribal nations and casinos

  • Partnered with Liquipedia.net to create the most community-centric and responsible betting integration in esports

  • Launched InVIE esports tournament series with Dota 2 Season 1 in South America

  • Became official gambling sponsor of Beyond the Summit's May 2021 CS:GO tournament; Beyond the Summit is one of the world's largest esports networks

  • Partnered with Riot Games to host the Summer 2021 North American LCS Proving Grounds tournament

  • The Company's Helix eSports subsidiary partnered with GUNNAR Optiks, the leader in blue-light gaming and computer glasses

  • Signed agreement to co-produce the 24th Annual East Coast Gaming Congress in Atlantic City

  • Signed exclusive content partnership with ESTV EsportsTV, the world's first 24-7 live linear video channel dedicated to esports

  • Partnered with SG Esports, a Brazilian professional gaming organization, as their primary jersey sponsor

  • Partnered with Real Cricket 20, the world's top mobile cricket game, to provide software integration services for the dafaNEWS Ecricket World Series

  • The Company's SportNation brand nominated for eGaming's Marketing Campaign of the Year Award

  • Partnered with Alpha Esports Tech to design computer vision technology for automated scoring

Fiscal Fourth Quarter 2021 Financial Results

  • Net revenue of $8.8 million, up $8.8 million over 4Q20 and up 63% compared to 3Q21's $5.4 million

  • Gross profit of $5.2 million, up $5.2 million over 4Q20 and up 69% compared to 3Q21's $3.1 million

  • Gross margin as a percentage of net sales was 59%, compared to 57% in 3Q21

  • Sales and marketing expenses of $5.1 million, up from $0.3 million in 4Q20 and compared to $2.4 million in 3Q21

  • General and administrative expenses of $10.5 million, up from $1.8 million in 4Q20 and compared to $6.3 million in 3Q21

  • Operating loss of $10.5 million, up from a loss of $2.1 million in 4Q20 and compared to $5.6 million in 3Q21

  • GAAP Net loss of $4.8 million or ($2.80) per basic common share, up from a net gain of $1.9 million or $2.09 per basic common share in 4Q20 and compared to a net loss of $12.4 million or ($0.73) per share in 3Q21

  • Non-GAAP adjusted EBITDA* of ($5.5 million), compared to adjusted EBITDA of ($0.9 million) in 4Q20 and compared to adjusted EBITDA of $2.1 million in 3Q21

Full Year Fiscal 2021 Financial Results

  • Net revenue of $16.8 million, up $16.8 million over FY20

  • Gross profit of $8.9 million, up $8.9 million over FY20

  • Gross margin as a percentage of net sales was 53%

  • Sales and marketing expenses of $10.0 million, up $9.7 million over FY20

  • General and administrative expenses of $24.6 million, up $3.7 million over FY20

  • Operating loss of $25.7 million, up $21.7 million over FY20

  • GAAP net loss of $26.4 million or $1.68 per basic common share, compared to a net loss of $10.4 million or $1.50 per share in FY20

  • Non-GAAP adjusted EBITDA* of ($14.0 million), compared to adjusted EBITDA of ($2.3 million) in FY20

  • Stockholders’ equity increased $63.4 million to $74.8 million at the end of FY21, up from $11.4 million at the end of FY20

* Reconciliation on non-GAAP financial measures provided in the tables of this press release.

Fiscal 2022 Financial Outlook

The Company expects net revenue to increase by at least 490% to $100 million to $105 million in FY22, driven primarily by the multiple acquisitions completed in calendar 2021.

Management Commentary

"The formidable foundation we built since our 2020 IPO drove strong performance in the fourth quarter and sets the stage for achieving significant growth in FY22. Based on a new record single-day performance of our iGaming division in late September, I am extremely confident in our ability to hit our guidance target," added Grant Johnson, CEO of Esports Entertainment Group. "The partnerships we have formed, from top professional sports teams to industry-leading esports and gaming companies, clearly demonstrate the strength of our expansive product and service portfolio, and I believe our future is very bright as we continue to execute on our rapid expansion strategy driven by the solidification of our market position and the ongoing growth of our unique assets."

Conference Call

Esports Entertainment Group will host a conference call and webcast today, Wednesday, October 13, at 5:00 p.m. ET to answer questions about the Company's operational and financial highlights for its fourth quarter and fiscal year 2021 as well as other recent developments.

Date: Wednesday, October 13, 2021

Time: 5:00 p.m. Eastern Time

Live Call: +1-800-437-2398 (U.S. Toll-Free) or +1-323-347-3294 (International)

Webcast: http://public.viavid.com/index.php?id=146743

For interested individuals unable to join the conference call, a dial-in replay of the call will be available until October 27 and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 6234338.

About Esports Entertainment Group

Esports Entertainment Group is a full stack esports and online gambling company fueled by the growth of video-gaming and the ascendance of esports with new generations. Our mission is to help connect the world at large with the future of sports entertainment in unique and enriching ways that bring fans and gamers together. Esports Entertainment Group and its affiliates are well-poised to help fans and players to stay connected and involved with their favorite esports. From traditional sports partnerships with professional NFL/NHL/NBA/FIFA teams, community-focused tournaments in a wide range of esports, and boots-on-the-ground LAN cafes, EEG has influence over the full-spectrum of esports and gaming at all levels. The Company maintains offices in New Jersey, the UK and Malta. For more information visit www.esportsentertainmentgroup.com.

FORWARD-LOOKING STATEMENTS

The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

Contact:

U.S. Investor Relations
RedChip Companies, Inc.
Dave Gentry
407-491-4498
dave@redchip.com

Media Inquiries
brandon.apter@esportsentertainmentgroup.com

Investor Relations Inquiries
Jeff@esportsentertainmentgroup.com

Esports Entertainment Group, Inc.
Condensed Consolidated Balance Sheets







ASSETS



June 30, 2021



June 30, 2020










Current assets








Cash


$

19,917,196


$

12,353,307


Restricted cash



3,443,172



-


Accounts receivable, net



136,681



-


Receivables reserved for users



2,290,105



-


Other receivables



658,745



-


Deposit on business acquisition



-



500,000


Prepaid expenses and other current assets



3,264,344



263,345


Total current assets



29,710,243



13,116,652





 



 


Equipment, net



726,942



8,041


Operating lease right-of-use asset



1,272,920



-


Intangible assets, net



45,772,555



2,000


Goodwill



40,937,370



-


Other non-current assets



1,315,009



6,833





 



 


TOTAL ASSETS


$

119,735,039


$

13,133,526





 



 


LIABILITIES AND STOCKHOLDERS' EQUITY



 



 





 



 


Current liabilities



 



 


Accounts payable and accrued expenses


$

8,458,689


$

811,549


Liabilities to customers



3,057,942



-


Deferred revenue



22,110



-


Liabilities to be settled in stock



-



927,855


Current portion of long-term debt



223,217



-


Operating lease liability - current



414,215



-


Total current liabilities



12,176,173



1,739,404





 



 


Long-term debt



6,523,804



-


Warrant liability



23,500,000



-


Deferred income taxes



1,870,861



-


Operating lease liability - non-current



878,809



-





 



 


Total liabilities



44,949,647



1,739,404





 



 


Commitments and contingencies (Note 14)



 



 





 



 


Stockholders' equity



 



 


Preferred stock $0.001 par value; 10,000,000 shares authorized, none issued and outstanding



-



-


Common stock $0.001 par value; 500,000,000 shares authorized, 21,896,145 and 11,233,223 shares issued and outstanding as of June 30, 2021 and June 30, 2020, respectively



21,896



11,233


Additional paid-in capital



122,341,002



31,918,491


Accumulated deficit



(46,908,336

)


(20,535,602

)

Accumulated other comprehensive loss



(669,170

)


-


Total stockholders' equity


$

74,785,392



11,394,122





 



 


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

119,735,039


$

13,133,526


 

Esports Entertainment Group, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss



Year Ended June 30,




2021


2020








Net revenue


$

16,783,914


$

-





 



 


Operating costs and expenses:



 



 


Cost of revenue



7,861,317



-


Sales and marketing



10,038,524



322,517


General and administrative



24,610,511



3,727,198


Total operating expenses



42,510,352



4,049,714





 



 


Operating loss



25,726,438



4,049,714





 



 


Other income (expense):



 



 


Interest expense



(698,973

)


(1,995,458

)

Net amortization of debt discount and premium on convertible debt



-



(1,156,877

)

Change in fair value of derivative liabilities



-



(2,432,302

)

Change in fair value of warrant liability



(1,549,924

)


-


Change in fair value of contingent consideration



(1,748,607

)


-


Loss on extinguishment of debt



-



(2,795,582

)

Gain on warrant exchange



-



1,894,418


Other non-operating income (loss)



(460,328

)


186,498


Total other expense



(4,457,832

)


(6,299,303

)




 



 


Loss before income taxes



30,184,270



10,349,017





 



 


Income tax benefit (expense)



3,811,536



(2,398

)




 



 


Net loss


$

26,372,734


$

10,351,415





 



 


Basic and diluted loss per common share


$

(1.68

)

$

(1.50

)

Weighted average number of common shares outstanding, basic and diluted



15,697,058



6,880,321


 

Esports Entertainment Group, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss





 

 

 

Quarter Ended June 30 

 

 

 

 

Q4 2021 

 

 

Q4 2020 

 

Net revenue



8,800,621



-





 



 


Operating costs and expenses:



 



 


Cost of revenue



3,611,428



-


Sales and marketing



5,146,836



322,517


General and administrative



10,528,001



1,814,328


Total operating expenses



19,286,264



2,136,844





 



 


Operating loss



10,485,643



2,136,844





 



 


Other income (expense):



 



 


Interest expense



(699,372

)


290,334


Net amortization of debt discount and premium on convertible debt



-



68,328


Change in fair value of derivative liabilities



-



3,433,149


Change in fair value of warrant liability



3,180,000



-


Change in fair value of contingent consideration



(442,803

)


-


Loss on extinguishment of debt



-



-


Gain on warrant exchange



-



-


Other non-operating income (loss)



(194,625

)


212,277


Total other expense



1,843,200



4,004,088





 



 


Loss before income taxes



8,642,443



(1,867,244

)




 



 


Income tax benefit (expense)



3,811,536



(2,398

)




 



 


Net loss (income)


$

4,830,907


$

(1,864,846

)




 



 


Basic and diluted loss per common share



(2.80

)


2.09


Weighted average number of common shares outstanding, basic and diluted



1,722,861



890,702





 



 


Non GAAP Items



 



 





 



 


Net income (loss)


$

(4,830,907

)

$

1,864,846


Increase / (decrease) to adjusted EBITDA



 



 


Interest


$

699,372


$

(290,334

)

Income tax


$

(3,811,536

)

$

2,398


Depreciation and amortization


$

1,891,636


$

2,618


Shared based compensation


$

1,074,608


$

1,165,802


Transaction cost


$

2,073,641


$

-


Settlement of litigation


$

(44,497

)

$

35,771


Other non-operating cost


$

194,842


$

(212,277

)

Change in fair value of warant liability


$

(3,180,000

)

$

-


Change in fair value of contingent consideration


$

442,803


$

-


Net amortization of debt discount and premium on convertible debt


$

-


$

(68,328

)

Change in fair value of derivative liabilities


$

-


$

(3,433,149

)

Loss on extinguishment of debt


$

-


$

-


Gain on warrant exchange


$

-


$

-





 



 


Adjusted EBITDA loss


$

(5,490,038

)

$

(932,653

)

 

Adjusted EBITDA

The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:







 

 

 

Year Ended June 30, 

 

 

 

 

2021 

 

 

2020 

 

Net income (loss)


$

(26,372,734

)

$

(10,351,415

)




 



 


Adjusted for:



 



 


Interest



698,973



1,995,458


Income tax



(3,811,536

)


2,398


Depreciation and amortization



3,578,797



20,631


Shared based compensation



4,129,726



1,614,236


Transaction cost



3,509,429



-


Settlement of litigation



464,409



114,226


Other non-operating cost



460,328



(186,498

)

Change in fair value of warant liability



1,549,924



-


Change in fair value of contingent consideration



1,748,607



-


Net amortization of debt discount and premium on convertible debt



-



1,156,877


Change in fair value of derivative liabilities



-



2,432,302


Loss on extinguishment of debt



-



2,795,582


Gain on warrant exchange



-



(1,894,418

)

Adjusted EBITDA loss


$

(14,044,077

)

$

(2,300,621

)

 

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses this non-GAAP financial measure for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that it provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measure used by the Company in this press release may be different from the methods used by other companies.

We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense, income tax expense or benefit, depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, non-core litigation, settlement and related costs, remeasurement of warrant liabilities, and certain other non-recurring, non-cash or non-core items, as described in the reconciliation below.

Adjusted EBITDA excludes certain expenses that are required in accordance with U.S. GAAP because they are non-recurring items (for example, in the case of transaction-related costs), non-cash expenditures (for example, in the case of depreciation, amortization, and stock-based compensation), or are not related to our underlying business performance (for example, in the case of interest income and expense and litigation settlement and related costs).

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/99520