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Achieves 30% Growth in Unique Visitors and Time Spent Across Web Properties
Secures $20 million Debt Financing Subsequent to Quarter End
TORONTO, Aug. 14, 2024 (GLOBE NEWSWIRE) — 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 June 30, 2024 (“Q2 2024”).
“In Q2, we delivered on our commitment to establish a stable financial footing and create a clear pathway to scalable profits. We’ve also delivered significant strength to our balance sheet, adding $20 million of liquidity through our debt financing to fund growth. We completed the outsourcing of our ad tech stack through our partnership with Playwire, a decision that has already resulted in significant performance improvements across our network. We’ve established an efficient and scalable operating model that has positioned us for substantial profitability improvements throughout the second half of 2024. Meanwhile, alongside all of these advancements, we have also reached the finish line on our path to profitability, in a quarter where we remained impacted by seasonal headwinds and did not have the benefit of any of our tentpole events or partnerships,” said Adrian Montgomery, Board Chair and Interim CEO of Enthusiast Gaming.
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“It is safe to say this is the turning point,” continued Mr. Montgomery. “We look out across a number of catalysts that we have in place to drive top line growth in the second half of the year, each of which is poised to amplify our profitability across our lean operating model and record gross margins. On top of traditional second half seasonal lifts, we’ve invested in our direct seller base, doubling the number of sellers in market in Q3 2024 versus the previous quarter; we have Season 3 of our tentpole program, NFL Tuesday Night Gaming, in September, along with the launch of our newest sports league partnership with the NHL; we anticipate strong organic growth in our web properties through long-awaited expansion releases in major game titles covered by our flagship properties; and we have the return of PocketGamer events in Helsinki and Jordan, all alongside a number of other growth drivers across our portfolio. Each of these elements builds on our solid Q2 baseline, setting the stage for a series of increasingly strong quarters. With this renewed momentum, I am more confident than ever that we are just getting started.”
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Financial Highlights for Q2 2024
Revenue of $14.7 million, compared to $42.6 million in Q2 2023, with the vast majority of the decline being attributable to the strategic deprioritization of low margin video platform revenue.
Gross profit of $9.7 million, compared to $15.0 million in Q2 2023, with gross margin expanding to 66.2% from 35.2% in the year ago period.
Operating expenses of $11.6 million, a $13.0 million year-over-year decrease from $24.6 million in Q2 2023 as a result of strategic initiatives taken to establish an efficient and scalable operating model in March 2024.
Adjusted EBITDA loss of $0.4 million, a $3.0 million improvement compared to $3.4 million in Q2 2023, and a $1.4 million improvement compared to $1.8 million in Q1 2024.
Net loss and comprehensive loss of $2.9 million in Q2 2024 compared to $12.4 million in Q2 2023.
Business Highlights for Q2 2024
The Company secured $20 million of additional funding by way of a four-year non-revolving term loan, strengthening its balance sheet and providing significant growth capital, with the financing closing on July 12, 2024.
The Company amplified its focus on its highly engaged communities, increasing unique visitors across its web properties by approximately 30% in Q2 2024 relative to the year ago period, leading to an increase in overall time spent across its web properties of 26% year-over-year, in each case according to Comscore.
The Company’s focus on owned and operated web properties yielded a 71% increase year-over-year in RPM in Q2 2024, following the outsourcing of its ad tech to Playwire, which began in mid-May 2024 and was substantially completed in June 2024.
The Company made a number of expansions to its product and entertainment offerings, including U.GG’s expansion into Helldivers 2 and Swarm (a new League of Legends game mode), Icy Veins’ expansion into Zenless Zone Zero and World of Warcraft’s Cataclysm Classic, The Sims Resource adding VIP curated Bundles and free trials for paid subscribers, and Luminosity hosting multiple invitational events featuring Smash and Rocket League for sponsors including Amazon Prime and Kroger Gaming.
The Company announced the extension of its NFL Tuesday Night Gaming partnership for a third season and launched its first special episode for Season 3 on July 23rd achieving over 60,000 watch hours and counting.
The Company signed a partnership with the National Hockey League to launch NHL Puck ‘N Play which will commence in Q4 2024, adding another flagship product to our direct sales offering and opening doors to a roster of major existing NHL sponsors.
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“We feel confident in the strategic decisions we made to improve profitability in 2024 by focusing on higher gross margin revenue lines coupled with a lower cost structure,” said Felicia DellaFortuna, CFO of Enthusiast Gaming. “This was further punctuated by delivering a strengthened balance sheet in July 2024 as well as significant growth in engagement of its communities in Q2 2024.”
Second Quarter 2024 Results Comparison
Revenue was $14.7 million in Q2 2024, a 65% decrease compared to $42.6 million in Q2 2023. Media and Content revenue was $10.6 million in Q2 2024, a 71% decrease from $36.9 million in Q2 2023. The Company’s strategic decision to de-prioritize the lower margin video platform revenue accounted for $19.5 million of the $26.3 million reduction. Direct Sales (the majority of which is included in media and content revenue) decreased from $8.7 million in Q2 2023 to $4.1 million in Q2 2024 mainly due to a lower number of ramped sellers than the year ago period, contributing $4.6 million to the decline in revenue. Esports and Entertainment revenue showed a decrease in Q2 2024 at $1.0 million relative to $1.7 million in Q2 2023 mainly due to the timing of certain events. Subscription revenue decreased from $4.0 million in Q2 2023 to $3.1 million in Q2 2024 mainly due to the sale of certain non-core, non-profitable assets in April 2024.
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Gross profit was $9.7 million in Q2 2024, a 35% decrease compared to $15.0 million in Q2 2023. Gross margin increased to 66.2% in Q2 2024 from 35.2% in Q2 2023.
Adjusted EBITDA loss was $0.4 million in Q2 2024 compared to an Adjusted EBITDA loss of $3.4 million in Q2 2023.
Net loss was $2.9 million, or $(0.02) per share, in Q2 2024, compared to $12.4 million, or $(0.07) per share, in Q2 2023.
Investor Conference Call
Management will host a conference call and webcast on Wednesday, August 14, 2024, at 5 p.m. ET to review and discuss its Q2 2024 results. Conference call details:
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.
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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.
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.
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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.
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Non-GAAP Measures
This press release references certain non-GAAP measures, including Adjusted EBITDA, as described below. These non-GAAP measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP 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 GAAP 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-GAAP 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.
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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 and six months ended June 30, 2024 and 2023
(Unaudited – Expressed in Canadian Dollars)
For the three months ended
For the six months ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Revenue
$
14,704,634
$
42,598,769
$
38,032,873
$
85,478,735
Cost of sales
4,974,098
27,616,077
14,226,178
53,730,485
Gross margin
9,730,536
14,982,692
23,806,695
31,748,250
Operating expenses
Professional fees
345,530
690,063
898,088
1,143,399
Consulting fees
477,109
1,595,468
1,929,345
2,903,952
Advertising and promotion
243,556
938,613
723,360
2,394,724
Office and general
580,681
1,930,338
1,575,079
4,222,121
Salaries and wages
5,413,206
9,932,310
13,759,507
19,139,334
Technology support, web development and content
2,836,032
4,156,966
7,104,691
9,452,990
Esports player, team and game expenses
568,051
645,715
1,177,163
1,281,162
Foreign exchange loss
35,599
22,851
141,534
137,408
Share-based compensation
377,777
1,788,490
(1,620,480
)
2,918,821
Amortization and depreciation
715,967
2,886,075
1,431,461
6,224,098
Total operating expenses
11,593,508
24,586,889
27,119,748
49,818,009
Other expenses (income)
Investment in associates impairment
26,497
–
26,497
–
Other long-term asset impairment
1,098,506
–
1,098,506
–
Share of net loss (income) from investment in associates and joint ventures
6,477
(106,277
)
(18,905
)
66,170
Interest and accretion
563,310
605,385
1,186,524
1,215,725
(Gain) loss on revaluation of deferred payment liability
(46,468
)
374,101
(63,368
)
202,077
Gain on sale of assets held for sale
(344,852
)
–
(344,852
)
–
Loss on disposal of property and equipment
25,997
–
25,997
–
Loss on modification of long-term debt
397,058
–
397,058
–
Interest income
(396
)
(1,514
)
(5,449
)
(62,721
)
Net loss before income taxes
(3,589,101
)
(10,475,892
)
(5,615,061
)
(19,491,010
)
Income taxes
Current tax expense
24,554
22,279
127,137
225,771
Deferred tax expense (recovery)
(200,377
)
(281,579
)
(27,173
)
(763,489
)
Net loss for the period
(3,413,278
)
(10,216,592
)
(5,715,025
)
(18,953,292
)
Other comprehensive (loss) income
Items that may be reclassified to profit or loss
Foreign currency translation adjustment
479,575
(2,141,800
)
1,465,701
(2,135,249
)
Net loss and comprehensive loss for the period
$
(2,933,703
)
$
(12,358,392
)
$
(4,249,324
)
$
(21,088,541
)
Net loss per share, basic and diluted
$
(0.02
)
$
(0.07
)
$
(0.04
)
$
(0.12
)
Weighted average number of common shares
outstanding, basic and diluted
155,721,839
152,171,249
155,699,940
151,970,362
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Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Financial Position
As of June 30, 2024 and December 31, 2023
(Unaudited – Expressed in Canadian Dollars)
June 30, 2024
December 31, 2023
ASSETS
Current
Cash
$
2,160,540
$
6,851,966
Trade and other receivables
12,498,506
31,502,732
Income tax receivable
98,065
31,251
Prepaid expenses
1,129,808
1,820,144
Total current assets
15,886,919
40,206,093
Non-current
Property and equipment
185,756
124,640
Right-of-use assets
1,050,543
1,441,149
Investment in associates and joint ventures
278
2,888,730
Long-term portion of prepaid expenses
188,455
182,108
Intangible assets
81,431,598
85,421,227
Goodwill
106,868,938
105,868,081
Total assets
$
205,612,487
$
236,132,028
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities
$
25,671,337
$
47,101,272
Contract liabilities
3,465,082
6,078,950
Income tax payable
77,018
274,924
Current portion of long-term debt
21,894,730
21,888,597
Current portion of deferred payment liability
–
82,231
Current portion of lease liabilities
665,803
740,212
Current portion of other long-term debt
13,007
9,668
Total current liabilities
51,786,977
76,175,854
Non-current
Long-term portion of deferred payment liability
2,098,507
2,083,262
Long-term portion of lease liabilities
634,774
938,845
Other long-term debt
145,018
140,613
Deferred tax liability
14,100,341
14,076,780
Total liabilities
$
68,765,617
$
93,415,354
Shareholders’ Equity
Share capital
452,994,596
444,474,076
Contributed surplus
25,736,189
35,877,189
Accumulated other comprehensive income
8,667,677
7,201,976
Deficit
(350,551,592
)
(344,836,567
)
Total shareholders’ equity
136,846,870
142,716,674
Total liabilities and shareholders’ equity
$
205,612,487
$
236,132,028
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Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the six months June 30, 2024 and 2023
(Unaudited – Expressed in Canadian Dollars)
June 30, 2024
June 30, 2023
Cash flows from operating activities
Net loss for the period
$
(5,715,025
)
$
(18,953,292
)
Items not affecting cash:
Investment in associates impairment
26,497
–
Other long-term asset impairment
1,098,506
–
Amortization and depreciation
1,431,461
6,224,098
Share-based compensation
(1,620,480
)
2,918,821
Accretion
(31,188
)
137,327
Deferred tax expense (recovery)
(27,173
)
(763,489
)
Share of net (income) loss from investment in associates and joint ventures
(18,905
)
66,170
Gain on sale of assets held for sale
(344,852
)
–
(Gain) loss on revaluation of deferred payment liability
(63,368
)
202,077
Foreign exchange (gain) loss
(463,931
)
24,480
Loss on disposal of property and equipment
25,997
–
Gain on settlement of accounts payable
(622,413
)
–
Loss on modification of long-term debt
397,058
–
Provisions
4,166
165,145
Changes in working capital:
Changes in trade and other receivables
19,982,340
5,108,139
Changes in prepaid expenses
843,787
736,371
Changes in accounts payable and accrued liabilities
(20,543,835
)
2,974,533
Changes in contract liabilities
(2,124,657
)
(477,981
)
Changes in income tax receivable and payable
136,207
594,894
Income tax paid
(400,927
)
(114,502
)
Net cash used in operating activities
(8,030,735
)
(1,157,209
)
Cash flows from investing activities
Proceeds from sale of assets held for sale
2,693,339
–
Distribution from investment in associates, net of adjustments
1,416,830
–
Repayment of deferred payment liability
(85,700
)
(844,350
)
Acquisition of intangible assets
–
(27,488
)
Acquisition of property and equipment
(115,815
)
(17,156
)
Net cash from (used in) investing activities
3,908,654
(888,994
)
Cash flows from financing activities
Proceeds from long-term debt, net of transaction costs
1,520,877
–
Repayment of long-term debt
(1,769,118
)
(2,176,470
)
Repayment of other long-term debt
(3,002
)
(6,775
)
Lease payments
(465,179
)
(439,184
)
Net cash used in financing activities
(716,422
)
(2,622,429
)
Foreign exchange effect on cash
147,077
(5,096
)
Net change in cash
(4,691,426
)
(4,673,728
)
Cash, beginning of period
6,851,966
7,415,516
Cash, end of period
$
2,160,540
$
2,741,788
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Enthusiast Gaming Holdings Inc.
EBITDA and Adjusted EBITDA
For the three and six months ended June 30, 2024 and 2023
(Unaudited – Expressed in Canadian Dollars)
For the three months ended
For the six months ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Gross margin
$
9,730,536
$
14,982,692
$
23,806,695
$
31,748,250
Operating expenses
(11,593,508
)
(24,586,889
)
(27,119,748
)
(49,818,009
)
Share-based compensation
377,777
1,788,490
(1,620,480
)
2,918,821
Amortization and depreciation
715,967
2,886,075
1,431,461
6,224,098
EBITDA
(769,228
)
(4,929,632
)
(3,502,072
)
(8,926,840
)
Severance
121,430
995,563
705,628
1,056,548
Listing fees & D&O insurance specific to the Company’s Nasdaq listing
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