Enthusiast Gaming Announces First Quarter 2022 Results

Toronto, Ontario, CANADA

Revenue of $47.2 million, up 57%
Gross profit $13.5 million, up 127%
Gross margin of 28.6%, up 880 bps

LOS ANGELES, May 16, 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 months ended March 31, 2022 (“Q1 2022”).

“2022 is off to a very strong start, led by accelerated revenue growth and substantial margin expansion. Q1 2022 gross profit was particularly strong and effectively equal to Q4 2021 gross profit, despite a strong seasonal difference between the two periods,” commented Adrian Montgomery, CEO of Enthusiast Gaming. “Our flywheel model, centered around communities, content, creators, and experiences, continues to drive increasing value. Our team is well positioned to continue delivering rapid top line growth, while increasing gross profit at a significantly faster rate. Further, to be able to accelerate revenue growth in a quarter that is seasonally the slowest is a strong sign for the balance of the year. We are confident these trends will continue as we focus on meeting profitability objectives in the short term.”

Q1 2022 Financial Highlights

  • Revenue of $47.2 million, a 57% increase vs revenue of $30.0 million in Q1 2021. The year-over-year increase in revenue was driven by increased content viewership, stronger RPMs across both web and video, higher direct sales, higher subscription revenue, and the acquisitions and growth of the Addicting Games and U.GG properties.
  • Gross profit of $13.5 million, a 127% increase vs gross profit of $5.9 million in Q1 2021 and effectively equal to Q4 2021 gross profit of $13.7 million, despite a strong seasonal difference between the two periods.
  • Gross margin of 28.6%, an increase of 880 bps vs gross margin of 19.8% in Q1 2021. The increase in gross margin is driven by the strong performance of Addicting Games and U.GG, as well as the higher direct sales and subscription revenue.
  • Direct sales of $5.2 million, a 136% increase vs direct sales of $2.2 million in Q1 2021. Renewals and additional business with existing customers accounted for 65% of direct sales. Direct sales are included in revenue.
  • Subscription revenue of $3.3 million, an 83% increase vs subscription revenue of $1.8 million in Q1 2021. The increase in subscription revenue was driven by an increase in paid subscribers. Paid subscribers were 233,000 as at March 31, 2022, a 70% increase vs paid subscribers of 137,000 as at March 31, 2021.

Q1 2022 Operational Highlights

  • The Company’s audience consumed 11.3 billion views of content across the web and video platforms, a 14% increase vs 9.9 billion in Q1 2021.
  • Renewals or additional business with key partners including ExitLag, US Navy, HBO Max, Truth Initiative, DoorDash, e.l.f Cosmetics, H&R Block.
  • Luminosity Gaming’s total social following reached 145 million globally in January 2022, having grown 13% since the last study in October 2021. In addition, the hours watched for Luminosity Gaming’s esports teams on Twitch surpassed 32 million globally in January, an increase of 34% since the last study, according to a Nielsen study.
  • Launched a partnership with Fractal, an NFT marketplace co-founded by Justin Kan, co-founder of Twitch. The partnership marks Enthusiast Gaming’s first with an NFT marketplace, and will see NFTs integrated into one of the Company’s HTML5-based games, EV.IO.
  • Ranked as the largest property in the Games category in the United Kingdom and Canada, based on digital media ratings from Comscore.

Organizational Update

The Company would also like to announce that Menashe Kestenbaum has left the Company’s Board of Directors. The Company thanks Menashe for his service and wishes him success in his future endeavors.

Earnings Announcement and Supplemental Information

Management will host a conference call and webcast on May 16, 2022, at 5:00 p.m. Eastern Time to review and discuss the first 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: 10019138

A live webcast can be heard at https://www.enthusiastgaming.com/shareholder-information/. 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 months ended March 31, 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.


Enthusiast Gaming Investor Relations:
Eric Bernofsky, Chief Corporate Officer

Media Relations:
Derek Holota, Provident Communications

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 March 31, 2022 and December 31, 2021   
(Unaudited - Expressed in Canadian Dollars)    
    March 31, 2022 December 31, 2021
  Cash$14,138,029 $22,654,262 
  Trade and other receivables 29,616,959  33,801,990 
  Investments 131,252  131,342 
  Loans receivable 50,935  176,931 
  Income tax receivable 399,509  356,366 
  Prepaid expenses 1,355,642  2,145,184 
 Total current assets 45,692,326  59,266,075 
  Property and equipment 223,063  247,988 
  Right-of-use assets 2,601,612  2,885,662 
  Investment in associates and joint ventures 1,181,310  885,269 
  Long-term portion of prepaid expenses 258,162  261,922 
  Intangible assets 123,975,000  129,138,595 
  Goodwill 193,942,515  195,097,659 
 Total assets$367,873,988 $387,783,170 
  Accounts payable and accrued liabilities$27,032,387 $34,391,221 
  Contract liabilities 3,867,901  3,890,569 
  Income tax payable 193,701  114,094 
  Current portion of long-term debt 2,000,000  2,000,000 
  Current portion of deferred payment liability26,702,412  27,244,146 
  Current portion of lease contract liabilities 771,736  796,835 
  Current portion of other long-term debt 10,961  11,121 
 Total current liabilities 60,579,098  68,447,986 
  Long-term debt 7,226,838  7,681,867 
  Long-term portion of deferred payment liability 20,084,613  20,794,275 
  Long-term lease contract liabilities 1,979,741  2,213,512 
  Other long-term debt 134,154  136,324 
  Deferred tax liability 25,070,291  25,740,885 
 Total liabilities$115,074,735 $125,014,849 
 Shareholders' Equity    
  Share capital 388,213,957  387,087,948 
  Contributed surplus 26,631,643  25,485,361 
  Accumulated other comprehensive income (loss) (681,264) 527,166 
  Deficit (161,365,083) (150,332,154)
 Total shareholders' equity  252,799,253  262,768,321 
 Total liabilities and shareholders' equity$367,873,988 $387,783,170 

Enthusiast Gaming Holdings Inc.    
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss 
For the three months ended March 31, 2022 and 2021    
(Unaudited - Expressed in Canadian Dollars)    
    March 31, 2022 March 31, 2021
 Revenue$47,167,538 $30,022,335 
 Cost of sales 33,676,159  24,091,327 
 Gross margin 13,491,379  5,931,008 
 Operating expenses    
  Professional fees 924,821  737,496 
  Consulting fees 1,478,174  1,310,627 
  Advertising and promotion 327,447  1,042,354 
  Office and general 2,262,905  706,945 
  Salaries and wages 8,696,875  4,628,275 
  Technology support, web development and content 3,458,868  1,394,883 
  Esports player, team and game expenses 1,511,488  1,528,605 
  Foreign exchange loss (gain) 8,587  (10,133)
  Share-based compensation 1,386,181  5,760,036 
  Amortization and depreciation 4,767,024  1,635,854 
 Total operating expenses 24,822,370  18,734,942 
 Other expenses (income)    
  Share of (income) loss from investment in associates and joint ventures (296,041) 78,418 
  Interest and accretion 1,430,669  791,314 
  Interest income (1,401) (18,320)
  Gain on revaluation of deferred payment liability (1,015,538) - 
  Gain on repayment of long-term debt -  (39,502)
  Change in fair value of investment -  (3,984)
 Net loss before income taxes (11,448,680) (13,611,860)
 Income taxes    
  Current tax expense (recovery) 110,529  (14,655)
  Deferred tax recovery (526,280) (79,779)
 Net loss for the period (11,032,929) (13,517,426)
 Other comprehensive income (loss)    
 Items that may be reclassified to profit or loss    
  Foreign currency translation adjustment (1,208,430) (47,702)
 Net loss and comprehensive loss for the period$(12,241,359)$(13,565,128)
 Net loss loss per share, basic and diluted$(0.08)$(0.12)
 Weighted average number of common shares     
  outstanding, basic and diluted 133,605,479  111,462,147 

Enthusiast Gaming Holdings Inc.    
Condensed Consolidated Interim Statements of Cash Flows   
For the three months ended March 31, 2022 and 2021    
(Unaudited - Expressed in Canadian Dollars)    
   March 31, 2022 March 31, 2021
 Cash flows from operating activities    
 Net loss for the period$(11,032,929)$(13,517,426)
 Items not affecting cash:    
 Amortization and depreciation 4,767,024  1,635,854 
 Share-based compensation 1,386,181  5,760,036 
 Interest and accretion 1,227,561  274,083 
 Deferred tax recovery (526,280) (79,779)
 Foreign exchange (gain) loss 13,458  (696)
 Gain on repayment of long-term debt -  (39,502)
 Gain on revaluation of deferred payment liability (1,015,538) - 
 Shares for services 63,320  93,553 
 Change in fair value of investment -  (3,984)
 Share of (income) loss from investment in associates and joint ventures (296,041) 78,418 
 Changes in working capital:    
 Changes in trade and other receivables 4,185,031  4,300,825 
 Changes in prepaid expenses 789,542  (5,623)
 Changes in loans receivable 125,995  12,500 
 Changes in accounts payable and accrued liabilities (7,236,523) (6,035,820)
 Changes in contract liabilities (22,668) 239,881 
 Changes in income tax 107,480  - 
 Income tax paid (71,016) - 
 Net cash used in operating activities (7,535,403) (7,287,680)
 Cash flows from investing activities    
 Acquisition of property and equipment (1,757) (3,398)
 Net cash used in investing activities (1,757) (3,398)
 Cash flows from financing activities    
 Proceeds from the issuance of shares for Offering, net of    
    transaction costs -  39,862,514 
 Proceeds from long-term debt, net of transaction costs -  944,787 
 Repayment of long-term debt (500,000) (13,773,470)
 Proceeds from exercise of options 69,820  594,836 
 Repayment of other long-term debt (2,741) - 
 Lease payments (240,001) (236,614)
 Net cash (used in) provided by financing activities (672,922) 27,392,053 
 Foreign exchange effect on cash (306,151) (24,502)
 Net change in cash (8,516,233) 20,076,473 
 Cash, beginning of period 22,654,262  4,323,823 
 Cash, end of period$14,138,029 $24,400,296