Allied Esports Entertainment, Inc. (NASDAQ: AESE) (the
“Company” or “AESE”), a global esports entertainment company, today
announced financial results for the third quarter ended September
30, 2022. This release refers to “continuing” and “discontinued”
operations due to the sale of the Company’s subsidiaries owning and
operating its poker-related business, the World Poker Tour® (“World
Poker Tour,” or “WPT®”) on July 12, 2021. Unless otherwise noted,
results presented in this release relate to the continuing
operations of the Company and its Allied Esports business, and
excludes the operations of the World Poker Tour, which are
classified as discontinued operations of the Company.
Commenting on the third quarter 2022 results and strategic
process, the Company’s Chief Executive Officer, Yinghua Chen, said,
“As the recovery of our Esports operations continues to gain
momentum, we delivered strong sequential quarter revenue growth of
35%. With a robust slate of Esports events scheduled for the fourth
quarter, we expect a strong finish to the year. I am also very
pleased with our continued progress in evaluating strategic
alternatives for our business, including investing the cash on our
balance sheet for M&A opportunities to generate profitable
growth and drive shareholder value. We intend to provide the market
with an update on these activities at the appropriate time.”
Third Quarter 2022 Financial Results
Revenues: Total revenues of $1.6 million decreased 7% for the
third quarter of 2022 compared to the third quarter of 2021, but
were up 35% from the second quarter of 2022. The decline from the
third quarter of 2021 was driven by a year-over-year reduction in
our multi-platform content revenues, most notably from live
streaming events with Trovo. The sequential improvement was
primarily driven by an increase in proprietary and third-party
production events at our Esports arena.
Costs and expenses: Total costs and expenses for the third
quarter of 2022 were $3.3 million, a decrease of 42% compared to
the third quarter of 2021. The net decrease in costs and expenses
is primarily due to a $1.0 million, or 29%, reduction in general
and administrative expenses, consisting primarily of severance
payments to a former executive and professional fees related to the
sale of WPT as well as a $1.1 million reduction in non-cash
depreciation and amortization expense.
Net loss for the third quarter of 2022 was $1.6 million compared
to net income of $74.3 million in the prior year period. The 2021
net income includes an $80.4 million gain on the sale of WPT
partially offset by a $3.2 million loss from discontinued
operations prior to the sale of WPT.
Adjusted EBITDA loss was $1.8 million for the third quarter of
2022 compared to a loss of $3.0 million in the third quarter of
2021. A reconciliation of the GAAP-basis net loss to adjusted
EBITDA is provided in the table at the end of this press
release.
Balance Sheet
As of September 30, 2022, the Company had a cash position of
$89.2 million, including $5.0 million of restricted cash compared
to $97.9 million at December 31, 2021, which also included $5.0
million of restricted cash. At September 30, 2022, the Company had
a working capital position of $81.6 million compared to $89.0
million at December 31, 2021. As of September 30, 2022, the Company
had approximately 39.1 million shares of outstanding common
stock.
Operational Update
Allied Esports produced 93 events in the third quarter of 2022,
with 61 proprietary events and 32 third party events. Third party
events were up 23% over the second quarter of 2022 and were
highlighted by HackerOne, Universal Domino League, the Rainbow Six
North America League and The Ultimate Crown: The Ultimate Battle
featuring MrBeast, Ninja, Voyboy, Mizkif, Tyler1, Doublelift and
Ludwig among other top influencers.
Live event and production business continued to grow stronger
with the Company’s HyperX Arena Las Vegas posting its best quarter
year to date while growing revenues by 51% and improving adjusted
EBITDA by 32% over the second quarter.
The Allied Esports Trucks were active with five eNASCAR Arcade
events taking place in the third quarter of 2022 at the Richmond
FireKeepers Casino 400 at Michigan International Speedway in
Brooklyn, Michigan, the NASCAR Cup Series Race at Richmond Raceway
in Richmond, Virginia, Go Bowling at The Glen at Watkins Glen
International in Watkins Glen, New York, the Coke Zero Sugar 400 at
Daytona International Speedway in Daytona Beach, Florida, and the
Cook Out Southern 500 at Darlington Raceway in Darlington, South
Carolina. In addition, the company executed pop-up gaming
exhibition events for Boys and Girls Club at the Keystone
Conference in Anaheim, California, for NASCAR at Bubba’s Block
Party featuring Bubba Wallace in Richmond, Virginia, for NASCAR and
the Coca-Cola iRacing Series at University of Central Florida in
Orange County, Florida and for NASCAR in partnership with Southern
Computer Warehouse at Kansas Speedway in Kansas City, Kansas.
Corporate Developments
During the third quarter of 2022, the Company’s Board of
Directors (the “Board”) appointed Yinghua Chen as Chief Executive
Officer. Ms. Chen had previously served as the Company’s President,
Chief Investment Officer and Board Secretary. Given Ms. Chen’s
additional responsibilities as Chief Executive Officer, Ms. Chen no
longer serves the Company as Chief Investment Officer or Board
Secretary, but continues to serve as President. Ms. Chen assumed
the Chief Executive Officer position from Lyle Berman, who served
as Interim Chief Executive Officer since February 2022. Mr. Berman
retained his position as Co-Chairman of the Board, and has been
appointed as Vice President, Mergers & Acquisitions, where he
will be more focused on the Company’s M&A activities.
Subsequent to the end of the third quarter of 2022, the Company
announced Judson Hannigan resigned as Chief Executive Officer of
Allied Esports International, Inc., the Company’s wholly owned
subsidiary that operates the Allied Esports business. In addition,
due to increased global economic uncertainty and in an effort to
improve the Company’s cash flow and financial flexibility, the
Company is in the process of closing Allied Esports’ European
office and will manage its operations through Allied Esports’
facilities in the U.S.
As previously announced, late in 2021, the Company engaged The
Benchmark Company, LLC to serve as the Company’s exclusive
financial advisor in connection with a potential business
combination transaction. The Company has reviewed a number of
potential target investment opportunities over the past several
months, and due diligence, as well as the continued sourcing of
other opportunities, remains ongoing. The Company intends to
provide further updates at the appropriate time.
Additionally, as previously announced, the Company remains in
the process of exploring strategic options for the Esports business
and intends to provide further updates at the appropriate time.
About Allied Esports Entertainment
Allied Esports Entertainment, Inc. (NASDAQ: AESE) is a global
esports entertainment venture dedicated to providing transformative
live experiences, multiplatform content and interactive services to
audiences worldwide. For more information, visit
alliedesports.gg.
Non-GAAP Financial Measures
As a supplement to our financial measures presented in
accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”), the Company presents certain non-GAAP measures of
financial performance. These non-GAAP financial measures are not
intended to be considered in isolation from, as a substitute for,
or as more important than, the financial information prepared and
presented in accordance with GAAP. In addition, these non-GAAP
measures have limitations in that they do not reflect all of the
items associated with the company’s results of operations as
determined in accordance with GAAP.
The Company provides net income (loss) and earnings (loss) per
share in accordance with GAAP. In addition, the Company provides
EBITDA (defined as GAAP net income (loss) from continuing
operations before interest (income) expense, income taxes,
depreciation, and amortization). The Company defines “Adjusted
EBITDA” as EBITDA excluding certain non-cash charges, such as
stock-based compensation, inducement expense, extinguishment losses
and impairment losses.
In the future, the Company may also consider whether other items
should also be excluded in calculating the non-GAAP financial
measures used by the Company. Management believes that the
presentation of these non-GAAP financial measures provides
investors with additional useful information to measure the
Company’s financial and operating performance. In particular, these
measures facilitate comparison of our operating performance between
periods and help investors to better understand the operating
results of the Company by excluding certain items that may not be
indicative of the Company’s core business, operating results, or
future outlook. Additionally, we consider quantitative and
qualitative factors in assessing whether to adjust for the impact
of items that may be significant or that could affect an
understanding of our ongoing financial and business performance or
trends. Internally, management uses these non-GAAP financial
measures, along with others, in assessing the Company’s operating
results, measuring compliance with any applicable requirements of
the Company’s debt financing agreements in place at such time, as
well as in planning and forecasting.
The Company’s non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles, and our
non-GAAP definitions of the “EBITDA” and “Adjusted EBITDA” do not
have a standardized meaning. Therefore, other companies may use the
same or similarly named measures, but include or exclude different
items, which may not provide investors a comparable view of the
Company’s performance in relation to other companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering the Company’s GAAP, as well as
non-GAAP, financial results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
Forward-Looking Statements
This communication contains certain forward-looking statements
under federal securities laws. Forward-looking statements may
include our statements regarding our goals, beliefs, strategies,
objectives, plans, including product and service developments,
future financial conditions, results or projections or current
expectations. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “intend” or “continue,” the negative of such terms, or
other comparable terminology. These statements are subject to known
and unknown risks, uncertainties, assumptions and other factors
that may cause actual results to be materially different from those
contemplated by the forward-looking statements. These
forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside our control, that could cause
actual results or outcomes to differ materially from those
discussed in these forward-looking statements. Important factors,
among others, that may affect actual results or outcomes include:
the ability to meet Nasdaq’s continued listing standards; our
ability to execute on our business plan; the ability to retain key
personnel; potential litigation; general economic and market
conditions impacting demand for our services; a change in our plans
to retain or invest the net cash proceeds from the WPT sale
transaction; our inability to enter into one or more future
acquisition or strategic transactions using the net proceeds from
the WPT sale transaction; and our ability, or a decision not to
pursue strategic options for the esports business. You should
consider the areas of risk described in connection with any
forward-looking statements that may be made herein. The business
and operations of AESE are subject to substantial risks, which
increase the uncertainty inherent in the forward-looking statements
contained in this communication. Except as required by law, we
undertake no obligation to release publicly the result of any
revision to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. Further information on
potential factors that could affect our business and results is
described under “Item 1A. Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2021, as filed with the
SEC on May 26, 2022, as well as subsequent reports we file with the
SEC. Readers are also urged to carefully review and consider the
various disclosures we made in such Annual Report on Form 10-K and
in subsequent reports with the SEC.
Allied Esports Entertainment,
Inc. and Subsidiaries
Condensed Consolidated Balance
Sheets
September 30, December 31,
2022
2021
(unaudited) Assets Current Assets Cash
$
84,225,000
$
92,887,030
Accounts receivable
121,394
389,040
Prepaid expenses and other current assets
1,214,231
984,777
Total Current Assets
85,560,625
94,260,847
Restricted cash
5,000,000
5,000,000
Property and equipment, net
4,831,180
6,136,893
Digital assets
56,970
-
Intangible assets, net
23,833
26,827
Deposits
379,105
379,105
Total Assets
$
95,851,713
$
105,803,672
Liabilities and Stockholders' Equity Current Liabilities
Accounts payable
$
745,584
$
341,161
Accrued expenses and other current liabilities
2,768,895
2,966,245
Accrued expenses - related party
-
1,800,000
Deferred revenue
411,510
141,825
Total Current Liabilities
3,925,989
5,249,231
Deferred rent
1,708,115
1,907,634
Total Liabilities
5,634,104
7,156,865
Commitments and Contingencies Stockholders' Equity Preferred stock,
$0.0001 par value, 1,000,000 shares authorized, none issued and
outstanding
-
-
Common stock, $0.0001 par value; 100,000,000 shares authorized,
39,085,470 shares issued and outstanding at September 30, 2022
39,116,907 shares issued and outstanding at December 31, 2021
3,909
3,912
Additional paid in capital
198,528,534
197,784,972
Accumulated deficit
(108,494,062
)
(99,411,683
)
Accumulated other comprehensive income
179,228
269,606
Total Stockholders' Equity
90,217,609
98,646,807
Total Liabilities and Stockholders' Equity
$
95,851,713
$
105,803,672
Allied Esports Entertainment,
Inc. and Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(unaudited)
For the Three Months Ended For the Nine Months
Ended September 30, September 30,
2022
2021
2022
2021
Revenues: In-person
$
1,551,963
$
1,455,867
$
4,884,400
$
2,627,781
Multiplatform content
13,679
229,961
251,130
383,684
Total Revenues
1,565,642
1,685,828
5,135,530
3,011,465
Costs and Expenses: In-person (exclusive of depreciation and
amortization)
1,112,645
1,249,640
4,002,312
2,442,750
Multiplatform content (exclusive of depreciation and amortization)
31,010
87,373
95,507
214,258
Selling and marketing expenses
54,445
87,755
185,614
216,428
General and administrative expenses
2,397,901
3,385,418
8,470,193
9,659,425
Depreciation and amortization
(328,739
)
806,137
1,288,106
2,495,939
Impairment of digital assets
-
-
164,411
-
Total Costs and Expenses
3,267,262
5,616,323
14,206,143
15,028,800
Loss From Operations
(1,701,620
)
(3,930,495
)
(9,070,613
)
(12,017,335
)
Other Expense: Gain on forgiveness of PPP loans and interest
-
912,475
-
912,475
Other (expense) income, net
34,073
54,434
(45,859
)
69,413
Interest income (expense), net
25,316
(11,809
)
34,093
(269,411
)
Total Other Expense
59,389
955,100
(11,766
)
712,477
Loss from continuing operations
(1,642,231
)
(2,975,395
)
(9,082,379
)
(11,304,858
)
(Loss) income from discontinued operations, net of tax provision:
Loss from discontinued operations before the sale of WPT
-
(3,151,740
)
-
(1,099,033
)
Gain on sale of WPT
-
80,429,729
-
80,429,729
Income from discontinued operations
-
77,277,989
-
79,330,696
Net income (loss)
$
(1,642,231
)
$
74,302,594
$
(9,082,379
)
$
68,025,838
Basic and Diluted Net Loss (Income) per Common Share
Continuing operations
$
(0.04
)
$
(0.08
)
$
(0.23
)
$
(0.29
)
Discontinued operations, net of tax
$
-
$
1.98
$
-
$
2.03
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted
39,094,696
39,056,403
39,092,133
38,989,671
Comprehensive Loss Net Loss
$
(1,642,231
)
$
74,302,594
$
(9,082,379
)
$
68,025,838
Other comprehensive (loss) income: Foreign currency translation
adjustments
(31,747
)
(22,031
)
(90,378
)
35,889
Total Comprehensive Loss
$
(1,673,978
)
$
74,280,563
$
(9,172,757
)
$
68,061,727
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are non-GAAP financial measures and
should not be considered as a substitute for net income (loss),
operating income (loss) or any other performance measure derived in
accordance with United States generally accepted accounting
principles (“GAAP”) or as an alternative to net cash provided by
operating activities as a measure of AESE’s profitability or
liquidity. AESE’s management believes EBITDA and Adjusted EBITDA
are useful because they allow external users of its financial
statements, such as industry analysts, investors, lenders and
rating agencies, to more effectively evaluate its operating
performance, compare the results of its operations from period to
period and against AESE’s peers without regard to AESE’s financing
methods, hedging positions or capital structure and because it
highlights trends in AESE’s business that may not otherwise be
apparent when relying solely on GAAP measures. AESE presents EBITDA
and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA
are important supplemental measures of its performance that are
frequently used by others in evaluating companies in its industry.
Because EBITDA and Adjusted EBITDA exclude some, but not all, items
that affect net income (loss) and may vary among companies, the
EBITDA and Adjusted EBITDA AESE presents may not be comparable to
similarly titled measures of other companies. AESE defines “EBITDA”
as earnings before interest, income taxes, depreciation and
amortization of intangibles. AESE defines “Adjusted EBITDA” as
EBITDA excluding stock-based compensation, gain on forgiveness of
PPP loans, transaction costs and other charges related to the sale
of WPT, impairment losses, conversion inducement expenses and
extinguishment losses.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net loss from continuing operations, AESE’s most
directly comparable financial measure calculated and presented in
accordance with GAAP.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Continuing operations Net loss from continuing operations
$
(1,642,231
)
$
(2,975,395
)
$
(9,082,379
)
$
(11,304,858
)
Interest (income) expense, net
(25,316
)
11,809
(34,093
)
269,411
Federal, state, and foreign taxes
-
(48,400
)
-
(48,400
)
Depreciation and amortization
(328,739
)
806,137
1,288,106
2,495,939
EBITDA
(1,996,286
)
(2,205,849
)
(7,828,366
)
(8,587,908
)
Stock compensation
238,840
151,220
793,229
1,081,362
PPP loan forgiveness
-
(912,475
)
-
(912,475
)
Impairment expense
-
-
164,411
-
Adjusted EBITDA
$
(1,757,446
)
$
(2,967,104
)
$
(6,870,726
)
$
(8,419,021
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221116005850/en/
Investor Contact: Lasse Glassen Addo Investor Relations
lglassen@addo.com 424-238-6249
Media Contact: Brian Fisher Allied Esports Entertainment
brian@alliedesports.com
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