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Enthusiast Gaming Announces Third Quarter 2022 Results

Enthusiast Gaming Inc.
Enthusiast Gaming Inc.

Revenue of $50.6 million, up 17%YOY
Record gross profit of $16.6 million, up 64%YOY
Record gross margin of 32.7%, up 930 bps YOY
Record direct sales of $10.1 million, up 49% YOY
Record subscription revenue of $3.8 million, up 51% YOY

LOS ANGELES, Nov. 14, 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 nine months ended September 30, 2022.

“We are pleased to report that we have achieved yet another record quarter on the back of all-time-highs in key KPIs, including quarterly gross profit, gross margins, direct sales and subscriptions, all despite the macroeconomic headwinds impacting the digital media and entertainment industry,” commented Adrian Montgomery, CEO of Enthusiast Gaming. “These results reflect the strength and resilience of our flywheel business model, which has allowed us to maintain strong financial growth while building out diversified revenue streams. Our disciplined focus on high-margin revenue opportunities, cost efficiencies and strategic investments like our first-of-its-kind partnership with the NFL for Tuesday Night Gaming have built Enthusiast into a fully-integrated media and entertainment company, a partner of choice for the world’s leading brands, and a dominant player in the gaming and esports world, now on the cusp of sustainable profitability with ample liquidity to achieve that objective.”

Q3 2022 Financial Highlights

  • Revenue of $50.6 million, a 17% increase vs revenue of $43.3 million in Q3 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.

  • Gross profit of $16.6 million, a 64% increase vs gross profit of $10.1 million in Q3 2021, and the highest quarterly gross profit to date.

  • Gross margin of 32.7%, an increase of 930 bps vs gross margin of 23.4% in Q3 2021. The increase in gross margin is driven by the high growth in direct sales and subscription revenue, and strong performances by Addicting Games, U.GG, and Pocket Gamer.

  • Direct sales of $10.1million, a 49% increase vs direct sales of $6.8 million in Q3 2021. Renewals and additional business with existing customers accounted for 65% of direct sales. Direct sales are included in revenue.

  • Subscription revenue of $3.8 million, a 51% increase vs subscription revenue of $2.5 million in Q3 2021. The increase in subscription revenue was driven by an increase in paid subscribers and pricing optimization. Paid subscribers were 260,000 as at September 30, 2022, a 25.6% increase vs paid subscribers of 207,000 as at September 30, 2021.

  • Recorded a non-cash goodwill impairment expense of $31.3 million.

  • Secured $10 million expansion of credit facility in September.

  • Sale of certain video gaming editorial websites for a purchase price of approx. $6.8 million, representing a multiple of approx. 4.5x associated revenue, and resulting in a gain on sale of intangible assets of $4.8 million.

Q3 2022 Operational Highlights

  • Renewals or new business with key notable partners including State Farm, HBO Max, Lego, Hulu, Nickelodeon, Amazon, RBC, Universal Pictures, Uber, Doordash, Hasbro, Nintendo US, Pandora Jewelry, GFuel, the FDA and Fidelity.

  • Signed multi-year partnership with the NFL to launch a first-of-its-kind gaming collaboration, NFL Tuesday Night Gaming (NFL TNG), which debuted on September 13, 2022. NFL TNG had approximately 1.9 million views across livestream and video content in Q3 2022.

  • EV.IO’s limited edition NFT mint of 2,500 tokens sold out in six hours at a price between 2.00-2.50 SOL.

  • Hosted two live events of Pocket Gamer Connects - Toronto in July and Helsinki in September.

  • Launched Raise Your Game initiative, a new inclusivity campaign which aims to support women in gaming.

Update on CEO Search Process

As previously announced on August 8, 2022, the Search Committee of the Board – which was struck immediately following the Company’s annual general meeting and is comprised entirely of independent directors – is conducting a thorough review process to identify a world-class executive to lead the Company as it continues to build the pre-eminent media and entertainment company for gamers, centered around Communities, Content, Creators, and Experiences.

Having interviewed a number of leading firms based in the United States, the Search Committee retained Russell Reynolds Associates by way of its CEO-practice based in California to assist the Search Committee with its identification and review of potential candidates. The Search Committee, together with Russell Reynolds, remains deep in-process conducting interviews and is encouraged by the quality of initial candidates.

Earnings Announcement and Supplemental Information

Management will host a conference call and webcast on November 14, 2022, at 5:00 p.m. Eastern Time to review and discuss the third quarter 2022 results.

Please call the following numbers to participate:

North America (toll-free): 1-855-239-1101

International: 1-412-317-5231

Conference ID: 10172910

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 nine months ended September 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 September 30, 2022 and December 31, 2021

 

 

 

 

 

(Unaudited - Expressed in Canadian Dollars)

 

 

 

 

 

 

 

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Cash

 

$

15,815,860

 

$

22,654,262

 

 

 

 

Trade and other receivables

 

 

37,579,516

 

 

33,801,990

 

 

 

 

Investments

 

 

131,858

 

 

131,342

 

 

 

 

Loans receivable

 

 

50,935

 

 

176,931

 

 

 

 

Income tax receivable

 

 

305,105

 

 

356,366

 

 

 

 

Prepaid expenses

 

 

2,791,103

 

 

2,145,184

 

 

 

Total current assets

 

 

56,674,377

 

 

59,266,075

 

 

 

Non-current

 

 

 

 

 

 

 

 

Property and equipment

 

 

198,528

 

 

247,988

 

 

 

 

Right-of-use assets

 

 

2,355,477

 

 

2,885,662

 

 

 

 

Investment in associates and joint ventures

 

 

1,886,271

 

 

885,269

 

 

 

 

Long-term portion of prepaid expenses

 

 

283,181

 

 

261,922

 

 

 

 

Intangible assets

 

 

120,526,179

 

 

129,138,595

 

 

 

 

Goodwill

 

 

172,196,371

 

 

195,097,659

 

 

 

Total assets

 

$

354,120,384

 

$

387,783,170

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

34,433,167

 

$

34,391,221

 

 

 

 

Contract liabilities

 

 

4,797,857

 

 

3,890,569

 

 

 

 

Income tax payable

 

 

403,375

 

 

114,094

 

 

 

 

Current portion of long-term debt

 

 

2,000,000

 

 

2,000,000

 

 

 

 

Current portion of deferred payment liability

 

2,172,633

 

 

27,244,146

 

 

 

 

Current portion of lease contract liabilities

 

 

849,051

 

 

796,835

 

 

 

 

Current portion of other long-term debt

 

 

8,016

 

 

11,121

 

 

 

Total current liabilities

 

 

44,664,099

 

 

68,447,986

 

 

 

Non-current

 

 

 

 

 

 

 

 

Long-term debt

 

 

16,547,428

 

 

7,681,867

 

 

 

 

Long-term portion of deferred payment liability

 

1,410,008

 

 

20,794,275

 

 

 

 

Long-term lease contract liabilities

 

 

1,752,038

 

 

2,213,512

 

 

 

 

Other long-term debt

 

 

146,769

 

 

136,324

 

 

 

 

Deferred tax liability

 

 

25,143,587

 

 

25,740,885

 

 

 

Total liabilities

 

$

89,663,929

 

$

125,014,849

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Share capital

 

 

439,922,535

 

 

387,087,948

 

 

 

 

Contributed surplus

 

 

30,582,079

 

 

25,485,361

 

 

 

 

Accumulated other comprehensive income

 

 

9,291,371

 

 

527,166

 

 

 

 

Deficit

 

 

(215,339,530

)

 

(150,332,154

)

 

 

Total shareholders' equity

 

 

264,456,455

 

 

262,768,321

 

 

 

Total liabilities and shareholders' equity

 

$

354,120,384

 

$

387,783,170

 

 

 

 

 

 

 

 

 

 

 



Enthusiast Gaming Holdings Inc.

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

 

 

 

 

 

 

 

 

For the three and nine months ended September 30, 2022 and 2021

 

 

 

 

 

 

 

 

 

(Unaudited - Expressed in Canadian Dollars)

 

 

For the three months ended

 

For the nine months ended

 

 

 

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

50,578,758

 

$

43,341,907

 

$

148,865,324

 

$

110,421,843

 

 

 

Cost of sales

 

 

34,018,169

 

 

33,216,294

 

 

103,470,191

 

 

86,345,922

 

 

 

Gross margin

 

 

16,560,589

 

 

10,125,613

 

 

45,395,133

 

 

24,075,921

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

766,057

 

 

434,862

 

 

2,358,559

 

 

2,385,837

 

 

 

 

Consulting fees

 

 

1,338,329

 

 

725,408

 

 

4,593,506

 

 

3,111,761

 

 

 

 

Advertising and promotion

 

 

662,279

 

 

609,587

 

 

1,417,344

 

 

2,465,529

 

 

 

 

Office and general

 

 

2,288,057

 

 

1,963,965

 

 

7,232,551

 

 

4,836,416

 

 

 

 

Annual general meeting legal and advisory costs

 

 

1,149,396

 

 

-

 

 

3,386,596

 

 

-

 

 

 

 

Salaries and wages

 

 

9,325,237

 

 

6,574,338

 

 

27,135,015

 

 

16,768,850

 

 

 

 

Technology support, web development and content

 

 

6,050,270

 

 

3,146,453

 

 

13,309,341

 

 

7,239,996

 

 

 

 

Esports player, team and game expenses

 

 

623,913

 

 

1,615,655

 

 

3,618,761

 

 

4,609,978

 

 

 

 

Foreign exchange gain

 

 

(480,528

)

 

(1,060,724

)

 

(1,105,730

)

 

(2,136,979

)

 

 

 

Share-based compensation

 

 

821,811

 

 

4,971,949

 

 

5,336,617

 

 

14,690,294

 

 

 

 

Amortization and depreciation

 

 

4,055,415

 

 

2,372,839

 

 

13,257,813

 

 

5,668,276

 

 

 

Total operating expenses

 

 

26,600,236

 

 

21,354,332

 

 

80,540,373

 

 

59,639,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses (income)

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

31,281,286

 

 

-

 

 

31,281,286

 

 

-

 

 

 

 

Transaction costs

 

 

-

 

 

301,343

 

 

114,853

 

 

510,472

 

 

 

 

Share of (income) loss from investment in associates and joint ventures

 

226,940

 

 

158,415

 

 

(1,001,002

)

 

230,675

 

 

 

 

Interest and accretion

 

 

414,203

 

 

430,538

 

 

2,963,981

 

 

1,702,839

 

 

 

 

Loss on settlement of deferred payment liability

 

 

-

 

 

-

 

 

3,302,824

 

 

-

 

 

 

 

Loss (gain) on revaluation of deferred payment liability

 

 

332,208

 

 

33,162

 

 

(539,555

)

 

122,346

 

 

 

 

Loss on derecognition of long-term debt

 

 

482,282

 

 

-

 

 

482,282

 

 

-

 

 

 

 

Gain on repayment of long-term debt

 

 

-

 

 

-

 

 

-

 

 

(39,502

)

 

 

 

Gain on sale of intangible assets

 

 

(4,836,075

)

 

-

 

 

(4,836,075

)

 

-

 

 

 

 

Gain on player buyouts

 

 

(24,660

)

 

-

 

 

(505,197

)

 

-

 

 

 

 

Change in fair value of investment

 

 

-

 

 

288,093

 

 

-

 

 

444,764

 

 

 

 

Loss on settlement of vendor-take-back loan

 

 

-

 

 

-

 

 

-

 

 

316,241

 

 

 

 

Interest income

 

 

(5,257

)

 

(9,315

)

 

(7,978

)

 

(50,546

)

 

 

Net loss before income taxes

 

 

(37,910,574

)

 

(12,430,955

)

 

(66,400,659

)

 

(38,801,326

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

Current tax expense

 

 

202,185

 

 

127,101

 

 

509,431

 

 

161,138

 

 

 

 

Deferred tax recovery

 

 

(1,018,542

)

 

(130,212

)

 

(1,902,714

)

 

(255,273

)

 

 

Net loss for the period

 

 

(37,094,217

)

 

(12,427,844

)

 

(65,007,376

)

 

(38,707,191

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

6,904,338

 

 

124,873

 

 

8,764,205

 

 

3,579

 

 

 

Net loss and comprehensive loss for the period

 

$

(30,189,879

)

$

(12,302,971

)

$

(56,243,171

)

$

(38,703,612

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.25

)

$

(0.10

)

$

(0.46

)

$

(0.33

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic and diluted

 

 

150,257,805

 

 

126,395,192

 

 

140,930,554

 

 

118,514,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Enthusiast Gaming Holdings Inc.

 

 

 

 

 

 

Condensed Consolidated Interim Statements of Cash Flows

 

 

 

 

 

 

For the nine months ended September 30, 2022 and 2021

 

 

 

 

 

 

(Unaudited - Expressed in Canadian Dollars)

 

 

 

 

 

 

 

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss for the period

 

$

(65,007,376

)

$

(38,707,191

)

 

 

Items not affecting cash:

 

 

 

 

 

 

 

Goodwill impairment

 

 

31,281,286

 

 

-

 

 

 

Amortization and depreciation

 

 

13,257,813

 

 

5,668,276

 

 

 

Share-based compensation

 

 

5,336,617

 

 

14,690,294

 

 

 

Interest and accretion

 

 

2,266,161

 

 

606,060

 

 

 

Deferred tax recovery

 

 

(1,902,714

)

 

(255,273

)

 

 

Share of (income) loss from investment in associates and joint ventures

 

(1,001,002

)

 

230,675

 

 

 

Gain on sale of intangible assets

 

 

(4,876,659

)

 

-

 

 

 

Loss on settlement of deferred payment liability

 

 

3,302,824

 

 

-

 

 

 

(Gain) loss on revaluation of deferred payment liability

 

 

(539,555

)

 

122,346

 

 

 

Foreign exchange gain

 

 

(1,416,264

)

 

(101,302

)

 

 

Gain on player buyouts

 

 

(505,197

)

 

-

 

 

 

Gain on settlement of accounts payable

 

 

(587,769

)

 

-

 

 

 

Loss on derecognition of long-term debt

 

 

482,282

 

 

-

 

 

 

Gain on repayment of long-term debt

 

 

-

 

 

(39,502

)

 

 

Loss on settlement of vendor-take-back loan

 

 

-

 

 

316,241

 

 

 

Shares for services

 

 

84,388

 

 

110,565

 

 

 

Change in fair value of investment

 

 

-

 

 

444,764

 

 

 

Changes in working capital:

 

 

 

 

 

 

 

Changes in trade and other receivables

 

 

(2,476,193

)

 

(3,896,016

)

 

 

Changes in prepaid expenses

 

 

(645,919

)

 

(2,584,504

)

 

 

Changes in loans receivable

 

 

125,995

 

 

37,500

 

 

 

Changes in accounts payable and accrued liabilities

 

 

2,479,331

 

 

2,383,538

 

 

 

Changes in contract liabilities

 

 

559,566

 

 

881,756

 

 

 

Changes in income tax

 

 

371,458

 

 

209,890

 

 

 

Income tax paid

 

 

(93,433

)

 

(359,358

)

 

 

Net cash used in operating activities

 

 

(19,504,360

)

 

(20,241,241

)

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Cash paid for mergers and acquisitions

 

 

(2,937,520

)

 

(27,071,176

)

 

 

Cash acquired from mergers and acquisitions

 

 

1,748,602

 

 

489,107

 

 

 

Proceeds from sale of intangible assets

 

 

5,460,959

 

 

-

 

 

 

Proceeds from player buyouts, net of transaction costs

 

 

505,197

 

 

-

 

 

 

Repayment of deferred payment liability

 

 

(472,833

)

 

-

 

 

 

Investment in associates and joint venture

 

 

-

 

 

(125,000

)

 

 

Acquisition of property and equipment

 

 

(5,245

)

 

(3,398

)

 

 

Net cash provided by (used in) investing activities

 

 

4,299,160

 

 

(26,710,467

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from the issuance of shares for Offerings, net of transaction costs

 

 

-

 

 

95,150,810

 

 

 

Proceeds from long-term debt, net of transaction costs

 

 

13,621,717

 

 

944,787

 

 

 

Repayment of long-term debt

 

 

(5,362,673

)

 

(14,023,470

)

 

 

Proceeds from exercise of options

 

 

69,821

 

 

784,431

 

 

 

Repayment of vendor-take-back loan

 

 

-

 

 

(6,158,329

)

 

 

Repayment of other long-term debt

 

 

(13,026

)

 

-

 

 

 

Lease payments

 

 

(705,075

)

 

(531,085

)

 

 

Net cash provided by financing activities

 

 

7,610,764

 

 

76,167,144

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange effect on cash

 

 

756,034

 

 

(12,725

)

 

 

Net change in cash

 

 

(6,838,402

)

 

29,202,711

 

 

 

Cash, beginning of period

 

 

22,654,262

 

 

4,323,823

 

 

 

Cash, end of period

 

$

15,815,860

 

$

33,526,534