Investing.com
Published May 23, 2022 01:42PM ET
Updated May 23, 2022 06:14PM ET
Updates Fiscal 2022 Revenue Guidance to $55 to $60 Million
Esports Entertainment Group, Inc. (GMBL) (GMBLW) today announced financial results for its fiscal 2022 third quarter ended March 31, 2022.
Fiscal Third Quarter 2022 Financial Results
* Reconciliation on non-GAAP financial measures provided in the tables of this press release.
Fiscal Third Quarter 2022 and Recent Operating Highlights
Management Commentary
"Our fiscal third quarter 2022 results illustrate growing top-line momentum across both our iGaming and esports verticals, which benefited from a more normalized operating environment in the quarter," said Grant Johnson, CEO of Esports Entertainment Group. "On the iGaming front, we generated record-breaking quarterly revenue at Lucky Dino, one of our proprietary iGaming brands, experienced more balanced sportsbook hold, and improved the overall profitability of the business, reflecting initial benefits from our newly implemented efficient marketing strategy. With respect to esports, the market continues to recover from the impact of the pandemic as more live, in-person events return to calendars worldwide. Following the successful launch of our proprietary peer-to-peer wagering platform, at the Hard Rock in Atlantic City in March, we expect an increase in similar events going forward as interest in our unique esports solution continues to grow. We also completed the full launch of our mobile real money esports betting product, VIE.gg, in New Jersey and are excited to further leverage this product offering in what is the U.S.'s 11th most populous state. In addition, we continue to see healthy interest in ALPHA and OMEGA, our turnkey solutions for businesses and entertainment venues looking to add an esports attraction, from a wide variety of potential customers who are looking for ways to leverage existing facilities by expanding their current offerings and create new revenue streams.
"Despite this momentum, we are addressing several near-term challenges which are constraining our ability to grow the business and to drive that growth to the bottom line. Given our lack of liquidity, we have been unable to fully monetize certain of our esports assets - including Helix, ggCircuit and EGL. As a result, we are taking a $38.6 million impairment charge in the quarter across these three businesses. We do not see a path to attractive profitability in the Helix business given its significant overhead and ongoing capex and are currently working to divest our two existing centers. ggCircuit and EGL are two assets which we have not effectively been able to monetize due to liquidity constraints. Our team is working internally to properly forecast the long-term opportunity for these businesses, which will allow us to better establish their carrying value. To address our liquidity position and improve our ability to invest in the business and adequately support our growth initiatives, we are actively working with our lender on key modifications to the loan and hope to have more to share on this front in the near-term.
"To address these challenges, position the Company for added growth, and ultimately achieve our operational and profitability goals, we are implementing a number of strategies which we believe will allow us to create value for our shareholders. First, our team is in the final stages of dramatically simplifying our offering in the esports space, focused on SAAS-based technology under the ggCircuit brand, in-person tournaments under the EGL brands, and our peer-to-peer wagering platform. This asset-light model will allow us to more efficiently leverage our esports assets. Second, and most importantly, we are aggressively cutting costs across our seven brands. This includes removal of duplicative functions and de-emphasizing non-core assets. It has also driven our iGaming team to be more strategic in our sales and marketing initiatives in certain European markets and implement a return-focused player investment strategy that yields more attractive customer acquisition metrics. To-date, we're projecting material savings over the next 12 months through an amended marketing strategy and through the implementation strategies to drive operating efficiencies. We have also identified further avenues to increase our cost savings and will pursue these in the coming months. We are encouraged by the early results of these efforts and expect them to have a significant positive impact on our future results, including our progress towards profitability, with a goal to achieve break-even on an annualized basis by early fiscal 2023.
"As we look ahead, the building blocks for further growth remain firmly in place. However, today's market conditions are different and, as such, our team has adjusted to focus on achieving breakeven as quickly as possible. Given this change in focus and our third quarter performance, we believe it is prudent to update the full-year revenue expectations to a range of $55 to $60 million from the prior $70 to $75 million range. While we have come a long way in a short period of time, there is much work ahead of us as we become a leaner organization that can operate more efficiently and create greater value for our partners and shareholders."
Written By: Investing.com
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