Enthusiast Gaming Announces Second Quarter 2022 Results

Toronto, Ontario, CANADA

Revenue of $51.1 million, up 38%
Gross profit of $15.3 million, up 91%
Gross margin of 30%, up 840 bps

LOS ANGELES, Aug. 15, 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 six months ended June 30, 2022.

“During the first half of 2022, we delivered our strongest half-year results to date, led by accelerated revenue growth and substantial gross margin expansion. Q2 2022 was strong, with gross profit up 91% versus Q2 2021, driven by more subscription revenue and higher direct sales with repeat and new customers,” commented Adrian Montgomery, CEO of Enthusiast Gaming. “These results were made possible by the commitment and dedication of our over 250 global staff that make us better each day. As we refine our flywheel model, we continue to unlock new revenue opportunities, while expanding our margin and driving towards near-term profitability.”

Q2 2022 Financial Highlights

  • Revenue of $51.1 million, a 38% increase vs revenue of $37.1 million in Q2 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, and higher RPMs across both web and video.
  • Gross profit of $15.3 million, a 91% increase vs gross profit of $8.0 million in Q2 2021, and the highest quarterly gross profit to date.
  • Gross margin of 30.0%, an increase of 840 bps vs gross margin of 21.6% in Q2 2021. The increase in gross margin is driven by the increase in direct sales and subscription revenue, and strong performances by Addicting Games and U.GG.
  • Direct sales of $9.3 million, a 111% increase vs direct sales of $4.4 million in Q2 2021. Renewals and additional business with existing customers accounted for 71% of direct sales. Direct sales are included in revenue.
  • Subscription revenue of $3.5 million, a 75% increase vs subscription revenue of $2.0 million in Q2 2021. The increase in subscription revenue was driven by an increase in paid subscribers and pricing optimization. Paid subscribers were 258,000 as at June 30, 2022, a 66% increase vs paid subscribers of 155,000 as at June 30, 2021.
  • On June 2, 2022, the Company settled certain deferred and earn-out payments with a face value of over US$40 million in connection with its acquisitions of Addicting Games, Outplayed, and Vedatis, through the issuance of an aggregate of 16,168,836 common shares at an implied weighted average value of US$2.47 per share.

Q2 2022 Operational Highlights

  • Renewals or new business with key notable partners including Adidas, US Navy, StateFarm, HBO Max, Lego, Universal Pictures, P&G, Fanduel, Toyota, Logitech, the FDA and RBC.
  • Activated on its partnership with Fractal, an NFT marketplace co-founded by Justin Kan, co-founder of Twitch, resulting in over 3,500 NFTs being minted by the Company and integrated into one of the Company’s HTML5-based games, EV.IO (playable at www.ev.io).
  • Continued product advancements including the expansion of the U.GG desktop app, and the introduction of in-game advertising and play-to-earn for certain Addicting Games titles.
  • Expansion of Luminosity into new titles including Rocket League, Apex Legends, and Halo.
  • Hosted Pocket Gamer Connects Seattle in May, and subsequent to the quarter hosted Pocket Gamer Connects Toronto in July, marking a continued return of live events for the Company.

Industry Update

The Company also congratulates FaZe Holdings Inc. on its recent NASDAQ listing, the completion of which demonstrates investor confidence in the industry. The Company believes an increased number of publicly-traded gaming and esports companies provides investors with useful comparables and additional data points for analysis.

Earnings Announcement and Supplemental Information

Management will host a conference call and webcast on August 15, 2022, at 5:00 p.m. Eastern Time to review and discuss the second 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: 10019972

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 six months ended June 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.


Enthusiast Gaming Investor Relations:
Eric Bernofsky, Chief Corporate Officer

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 June 30, 2022 and December 31, 2021     
(Unaudited - Expressed in Canadian Dollars)      
     June 30, 2022  December 31, 2021  
  Cash $14,939,342 $22,654,262  
  Trade and other receivables  32,477,168  33,801,990  
  Investments  131,440  131,342  
  Loans receivable  50,935  176,931  
  Income tax receivable  323,228  356,366  
  Prepaid expenses  3,743,564  2,145,184  
 Total current assets  51,665,677  59,266,075  
  Property and equipment  208,722  247,988  
  Right-of-use assets  2,451,209  2,885,662  
  Investment in associates and joint ventures  2,113,211  885,269  
  Long-term portion of prepaid expenses  266,220  261,922  
  Intangible assets  123,689,984  129,138,595  
  Goodwill  198,383,073  195,097,659  
 Total assets $378,778,096 $387,783,170  
  Accounts payable and accrued liabilities $41,620,596 $34,391,221  
  Contract liabilities  4,549,149  3,890,569  
  Income tax payable  276,464  114,094  
  Current portion of long-term debt  2,000,000  2,000,000  
  Current portion of deferred payment liability 2,214,036  27,244,146  
  Current portion of lease contract liabilities  796,717  796,835  
  Current portion of other long-term debt  14,129  11,121  
 Total current liabilities  51,471,091  68,447,986  
  Long-term debt  6,770,708  7,681,867  
  Long-term portion of deferred payment liability 1,060,322  20,794,275  
  Long-term lease contract liabilities  1,890,435  2,213,512  
  Other long-term debt  138,147  136,324  
  Deferred tax liability  25,592,497  25,740,885  
 Total liabilities $86,923,200 $125,014,849  
 Shareholders' Equity      
  Share capital  437,952,908  387,087,948  
  Contributed surplus  29,760,268  25,485,361  
  Accumulated other comprehensive income  2,387,033  527,166  
  Deficit  (178,245,313) (150,332,154) 
 Total shareholders' equity  291,854,896  262,768,321  
 Total liabilities and shareholders' equity $378,778,096 $387,783,170  

Enthusiast Gaming Holdings Inc.         
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss       
For the three and six months ended June 30, 2022 and 2021         
(Unaudited - Expressed in Canadian Dollars) For the three months ended For the six months ended 
    June 30, 2022  June 30, 2021  June 30, 2022  June 30, 2021  
 Revenue$51,119,028 $37,057,601 $98,286,566 $67,079,936  
 Cost of sales 35,775,863  29,038,301  69,452,022  53,129,628  
 Gross margin 15,343,165  8,019,300  28,834,544  13,950,308  
 Operating expenses         
  Professional fees 667,681  1,213,479  1,592,502  1,950,975  
  Consulting fees 1,777,003  1,075,726  3,255,177  2,386,353  
  Advertising and promotion 427,618  813,588  755,065  1,855,942  
  Office and general 2,681,589  2,165,506  4,944,494  2,872,451  
  Annual general meeting legal and advisory costs 2,237,200  -  2,237,200  -  
  Salaries and wages 9,112,903  5,566,237  17,809,778  10,194,512  
  Technology support, web development and content 3,800,203  2,698,660  7,259,071  4,093,543  
  Esports player, team and game expenses 1,483,360  1,465,718  2,994,848  2,994,323  
  Foreign exchange gain (633,789) (1,066,122) (625,202) (1,076,255) 
  Share-based compensation 3,128,625  3,958,309  4,514,806  9,718,345  
  Amortization and depreciation 4,435,374  1,659,583  9,202,398  3,295,437  
 Total operating expenses 29,117,767  19,550,684  53,940,137  38,285,626  
 Other expenses (income)         
  Transaction costs 114,853  209,129  114,853  209,129  
  Share of net (income) loss from investment in associates and joint ventures (931,901) (6,158) (1,227,942) 72,260  
  Interest and accretion 1,119,109  480,987  2,549,778  1,272,301  
  Loss on settlement of deferred payment liability 3,302,824  -  3,302,824  -  
  Gain on player buyouts (480,537) -  (480,537) -  
  Change in fair value of investment -  160,655  -  156,671  
  Gain on repayment of long-term debt -  -  -  (39,502) 
  Loss on settlement of vendor-take-back loan -  316,241  -  316,241  
  Loss (gain) on revaluation of deferred payment liability 143,775  89,184  (871,763) 89,184  
  Interest income (1,320) (22,911) (2,721) (41,231) 
 Net loss before income taxes (17,041,405) (12,758,511) (28,490,085) (26,370,371) 
 Income taxes         
  Current tax expense 196,717  48,692  307,246  34,037  
  Deferred tax recovery (357,892) (45,282) (884,172) (125,061) 
 Net loss for the period (16,880,230) (12,761,921) (27,913,159) (26,279,347) 
 Other comprehensive income (loss)         
 Items that may be reclassified to profit or loss         
  Foreign currency translation adjustment 3,068,297  (73,592) 1,859,867  (121,294) 
 Net loss and comprehensive loss for the period$(13,811,933)$(12,835,513)$(26,053,292)$(26,400,641) 
 Net loss loss per share, basic and diluted$(0.12)$(0.11)$(0.20)$(0.23) 
 Weighted average number of common shares outstanding, basic and diluted 138,745,383  117,523,027  136,189,630  114,509,330  

Enthusiast Gaming Holdings Inc.     
Condensed Consolidated Interim Statements of Cash Flows    
For the six months ended June 30, 2022 and 2021     
(Unaudited - Expressed in Canadian Dollars)     
    June 30, 2022  June 30, 2021 
 Cash flows from operating activities     
 Net loss for the period $(27,913,159)$(26,279,347)
 Items not affecting cash:     
 Amortization and depreciation  9,202,398  3,295,437 
 Share-based compensation  4,514,806  9,718,345 
 Interest and accretion  2,143,527  465,657 
 Deferred tax recovery  (884,172) (125,061)
 Loss on settlement of deferred payment liability  3,302,824  - 
 Foreign exchange (gain) loss  (492,716) 587,716 
 Gain on player buyouts  (480,537) - 
 Gain on repayment of long-term debt  -  (39,502)
 Loss on settlement of vendor-take-back loan  -  316,241 
 (Gain) loss on revaluation of deferred payment liability  (871,763) 89,184 
 Shares for services  84,388  185,662 
 Change in fair value of investment  -  156,671 
 Share of net (income) loss from investment in associates and joint ventures (1,227,942) 72,260 
 Changes in working capital:     
 Changes in trade and other receivables  1,255,456  375,985 
 Changes in prepaid expenses  (1,598,380) (3,608,526)
 Changes in loans receivable  125,995  37,500 
 Changes in accounts payable and accrued liabilities  7,128,498  (2,511,575)
 Changes in contract liabilities  310,858  998,992 
 Changes in income tax  174,993  75,753 
 Income tax paid  (42,002) (281,836)
 Net cash used in operating activities  (5,266,928) (16,470,444)
 Cash flows from investing activities     
 Cash paid for mergers and acquisitions  (2,937,520) (12,549,396)
 Cash acquired from mergers and acquisitions  1,748,602  162,674 
 Proceeds from player buyouts, net of transaction costs  480,537  - 
 Deferred payment liability  (472,833) - 
 Acquisition of property and equipment  (4,165) (3,398)
 Net cash used in investing activities  (1,185,379) (12,390,120)
 Cash flows from financing activities     
 Proceeds from the issuance of shares for Offerings, net of transaction costs  -  95,183,398 
 Proceeds from long-term debt, net of transaction costs  -  944,787 
 Repayment of long-term debt  (1,000,000) (13,773,470)
 Proceeds from exercise of options  69,821  784,431 
 Repayment of vendor-take-back loan  -  (6,158,329)
 Repayment of other long-term debt  (2,826) - 
 Lease payments  (417,092) (392,175)
 Net cash (used in) provided by financing activities  (1,350,097) 76,588,642 
 Foreign exchange effect on cash  87,484  (684,328)
 Net change in cash  (7,714,920) 47,043,750 
 Cash, beginning of period  22,654,262  4,323,823 
 Cash, end of period $14,939,342 $51,367,573