Enthusiast Gaming Announces Third Quarter 2022 Results

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.


Enthusiast Gaming Investor Relations:
Eric Bernofsky, Chief Corporate Officer
[email protected]

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    
    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    
    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    
    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    
    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    

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