Enthusiast Gaming Reports Q1 2024 Results

Enthusiast Gaming Inc.

Accelerates Path to Profitability with Smallest Reported Adjusted EBITDA Loss Ever

TORONTO, May 15, 2024 (GLOBE NEWSWIRE) -- Enthusiast Gaming Holdings Inc. (“Enthusiast Gaming” or the “Company”) (TSX: EGLX), a leading gaming media and entertainment company, today announced financial results for the three months ended March 31, 2024 (“Q1 2024”).

“The cornerstone of Enthusiast Gaming has always been, and remains, the strength of its owned and operated assets. Assets like TheSimsResource, U.GG, Icy-Veins, PocketGamer, Luminosity Gaming, NFL Tuesday Night Gaming, and our many other assets and properties that boast large, coveted, and highly engaged gaming audiences,” commented Adrian Montgomery, Board Chair and interim CEO of Enthusiast Gaming. “During and subsequent to the first quarter, the team has been hard at work, delivering much needed focus, stability, and excitement to the business, including streamlining the Company’s cost structure, executing significant product advancements across our asset portfolio, expanding our key strategic partnerships, including the signing of a new sports league, and the divestment of certain non-core, non-profitable legacy assets, bolstering the Company’s balance sheet.”

“On the back of all of these changes,” Montgomery continued, “we have reported our best quarterly Adjusted EBITDA in company history, in our seasonally slowest quarter of the year, and having only initiated our cost savings program in March of this year. These results indicate a clear path to scalable and sustainable profitability in 2024, positioning us for a return to growth.”

Financial Highlights for Q1 2024

• Revenue of $23.3 million, compared to $42.9 million in Q1 2023, with the majority of the decline being related to lower margin revenue attributable to the video platform.

• Gross profit of $14.1 million, compared to $16.8 million in Q1 2023, with gross margin expanding to 60.3% from 39.1%.

• Operating expenses of $15.5 million, a $9.7 million year-over-year decrease from $25.2 million in Q1 2023.

• Adjusted EBITDA loss of $1.8 million, a $1.3 million improvement compared to $3.1 million in Q1 2023, resulting from the successful implementation of certain cost savings measures and the deprioritization of certain business activities, mitigating the related decline in revenue.

• Net loss and comprehensive loss of $1.3 million in Q1 2024 compared to a net loss and comprehensive loss of $8.7 million in Q1 2023.
  

Business Highlights for Q1 2024

• The Company announced a $10 million cost reduction program to be primarily driven by efficiencies in ad tech, the insourcing of production and content resources, headcount reductions and other areas, which was principally executed in Q1 2024.

• Direct sales (included in revenue) for Q1 2024, was $6.6 million as compared to approximately $10.0 million for Q1 2023, as a result of the timing of advertising spends associated with certain consumer product goods clients period-over-period as well as macroeconomic impacts on the technology/telecommunication industry.

• The Company amplified its focus on its highly engaged communities, resulting in a 23% increase in aggregate pageviews in Q1 2024 as compared to Q4 2023 and, excluding the impact of the video platform, a 60% year-over-year increase in time spent per unique visitor.

• The Company made a number of expansions to its product and entertainment offerings, including U.GG’s expansion into Riot Game’s title Teamfight Tactics, Icy-Veins expansion into Last Epoch, PocketGamer Connects hosting its largest ever event in London in January and an inaugural event in San Francisco in March, and Luminosity expanding its presence to New York hosting Luminosity Makes Big Moves with over 57,000 peak concurrent viewers

• The Company entered into a multi-year partnership with Playwire, a leading advertising technology provider, to outsource its ad tech stack and amplify its monetization opportunities across its communities.

• The previously announced sale of certain non-core, non-profitable casual gaming assets for a purchase price of approximately US$3.0 million closed on April 15, 2024, helping strengthen the balance sheet.

• The Company expanded its sports league partnerships, including entering into a strategic partnership with an additional major US sports league, further details of which will be announced closer to the launch of the program.

• The Company concluded Season 2 of NFL TNG, with Season 2 achieving a 52% increase in total impressions as compared to Season 1. Total impressions for Season 2 were 111 million, averaging over 5 million per week.

“We are working swiftly to provide sustainable and scalable profitability for the Company, and delivering the lowest quarter of Adjusted EBITDA losses in Q1 2024 shows our commitment to do just that. We continue to be committed to growth and focusing on higher gross margin revenue lines like direct sales, subscription and programmatic across our owned and operated sites.” said Felicia DellaFortuna, CFO of Enthusiast Gaming.

First Quarter 2024 Results Comparison

Revenue was $23.3 million in Q1 2024, a 46% decrease compared to $42.9 million in Q1 2023. Media and Content revenue was $15.9 million in Q1 2024, a 55% decrease from $35.5 million in Q1 2023. Esports and Entertainment revenue and Subscription revenue remained consistent in Q1 2024 compared to Q1 2023 at $3.4 million and $4.0 million, respectively. During Q1 2024, the Company experienced lower views on its video platforms due to the strategic decision to de-prioritize the lower margin video platform revenue which yielded the vast majority of the decline in Media and Content revenue in Q1 2024 compared to Q1 2023. Direct Sales (the majority of which is included in media and content revenue) decreased by $3.4 million to $6.6 million in Q1 2024 as compared to $10.0 million in Q1 2023. This is a result of the timing of advertising spends associated with certain consumer product goods clients year-over-year as well as macroeconomic impacts on the technology/telecommunication industry.

Gross profit was $14.1 million in Q1 2024, a 16% decrease compared to the $16.8 million in Q1 2023. Gross margin increased to 60.3% in Q1 2024 from 39.1% in Q1 2023.

Adjusted EBITDA loss was $1.8 million in Q1 2024 compared to an Adjusted EBITDA loss of $3.1 million in Q1 2023.

Net loss and comprehensive loss was $1.3 million, or $(0.01) per share, in Q1 2024, compared to $8.7 million, or $(0.06) per share, in Q1 2023.

Organizational Updates

The Company is pleased to announce that Mr. John Zorbas has been appointed to the Board of Directors of the Company, effective May 15, 2024. Mr. Zorbas is currently the CEO, President and director of Captor Capital Corp. and serves on the board of directors of numerous Canadian and UK-based public companies. Mr. Zorbas brings extensive capital markets and public company experience that will make him a valuable addition to the Board.

Investor Conference Call

Management will host a conference call and webcast on Wednesday, May 15, 2024, at 5 p.m. ET to review and discuss its Q1 2024 results. Conference call details:

• Dial-in: 1-855-239-1101 (Conference ID: 10189020)

• Live webcast: https://viavid.webcasts.com/starthere.jsp?ei=1670082&tp_key=fa58616338

A replay will be available on Enthusiast Gaming’s website at enthusiastgaming.com/investors.

Supplemental Information

Enthusiast Gaming’s financial statements and management discussion and analysis (“MD&A”) are available at www.sedarplus.ca and enthusiastgaming.com/investors. All amounts are in Canadian dollars.

About Enthusiast Gaming

Enthusiast Gaming is a leading gaming media and entertainment company, building the largest platform for video game enthusiasts and esports fans to connect and compete worldwide. Combining the elements of its five core pillars: creators, content, communities, games, and experiences, Enthusiast Gaming provides a unique opportunity for marketers to create integrated brand solutions to connect with coveted Gen Z and Millennial audiences. Through its proprietary mix of digital media, content and gaming assets, Enthusiast Gaming continues to grow its network of communities, reflecting the scale and diversity of gaming enthusiasts today.

Contacts

Enthusiast Gaming: Felicia DellaFortuna, Chief Financial Officer
Investors: investor@enthusiastgaming.com
Media: press@enthusiastgaming.com

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.sedarplus.ca. 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.

Non-IFRS Measures

This press release references certain non-IFRS measures, including Adjusted EBITDA, as described below. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.

The Company uses non-IFRS measures including:

“EBITDA”, which is defined as earnings before interest, taxes, depreciation and amortization. Enthusiast Gaming calculates EBITDA using gross margin less total operating expenses plus share-based compensation, amortization and depreciation and annual general meeting legal and advisory costs; and,

“Adjusted EBITDA”, which is defined as EBITDA plus severance and other non-recurring public costs. Non-recurring costs include items such as annual Nasdaq listing fees and directors and officers (“D&O”) liability insurance specific to the Company’s former listing on Nasdaq.

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.

Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
For the three months ended March 31, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
	For the three months ended
	March 31, 2024			March 31, 2023
Revenue	$	23,328,239		$	42,879,966
Cost of sales		9,252,080			26,114,408
Gross margin		14,076,159			16,765,558
Operating expenses
Professional fees		552,558			453,336
Consulting fees		1,452,236			1,308,484
Advertising and promotion		479,804			1,456,111
Office and general		994,398			2,291,783
Salaries and wages		8,346,301			9,207,024
Technology support, web development and content		4,268,659			5,296,024
Esports player, team and game expenses		609,112			635,447
Foreign exchange loss		105,935			114,557
Share-based compensation		(1,998,257	)		1,130,331
Amortization and depreciation		715,494			3,338,023
Total operating expenses		15,526,240			25,231,120
Other expenses (income)
Share of net (income) loss from investment in associates and joint ventures		(25,382	)		172,447
Interest and accretion		623,214			610,340
Gain on revaluation of deferred payment liability		(16,900	)		(172,024	)
Interest income		(5,053	)		(61,207	)
Net loss before income taxes		(2,025,960	)		(9,015,118	)
Income taxes
Current tax expense		102,583			203,492
Deferred tax expense (recovery)		173,204			(481,910	)
Net loss for the period		(2,301,747	)		(8,736,700	)
Other comprehensive (loss) income
Items that may be reclassified to profit or loss
Foreign currency translation adjustment		986,126			6,551
Net loss and comprehensive loss for the period	$	(1,315,621	)	$	(8,730,149	)
Net loss per share, basic and diluted	$	(0.01	)	$	(0.06	)
Weighted average number of common shares outstanding, basic and diluted		155,678,040			151,767,243

Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Financial Position
As of March 31, 2024 and December 31, 2023
(Unaudited - Expressed in Canadian Dollars)
		March 31, 2024			December 31, 2023
ASSETS
Current
Cash	$	1,719,082		$	6,851,966
Trade and other receivables		14,617,101			31,502,732
Income tax receivable		13,694			31,251
Prepaid expenses		896,722			1,820,144
Assets held for sale		3,797,408			-
Total current assets		21,044,007			40,206,093
Non-current
Property and equipment		111,838			124,640
Right-of-use assets		1,257,305			1,441,149
Investment in associates and joint ventures		2,914,112			2,888,730
Long-term portion of prepaid expenses		186,569			182,108
Intangible assets		81,687,652			85,421,227
Goodwill		106,561,487			105,868,081
Total assets	$	213,762,970		$	236,132,028
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities	$	30,350,609		$	47,101,272
Contract liabilities		3,889,364			6,078,950
Income tax payable		344,615			274,924
Current portion of long-term debt		21,622,374			21,888,597
Current portion of deferred payment liability		85,098			82,231
Current portion of lease liabilities		731,652			740,212
Current portion of other long-term debt		12,877			9,668
Total current liabilities		57,036,589			76,175,854
Non-current
Long-term portion of deferred payment liability		2,099,935			2,083,262
Long-term lease liabilities		796,054			938,845
Other long-term debt		143,798			140,613
Deferred tax liability		14,283,798			14,076,780
Total liabilities	$	74,360,174		$	93,415,354
Shareholders' Equity
Share capital		452,994,596			444,474,076
Contributed surplus		25,358,412			35,877,189
Accumulated other comprehensive income		8,188,102			7,201,976
Deficit		(347,138,314	)		(344,836,567	)
Total shareholders' equity		139,402,796			142,716,674
Total liabilities and shareholders' equity	$	213,762,970		$	236,132,028

Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the three months March 31, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
		March 31, 2024			March 31, 2023
Cash flows from operating activities
Net loss for the period	$	(2,301,747	)	$	(8,736,700	)
Items not affecting cash:
Amortization and depreciation		715,494			3,338,023
Share-based compensation		(1,998,257	)		1,130,331
Accretion		10,296			83,480
Deferred tax expense (recovery)		173,204			(481,910	)
Share of net (income) loss from investment in associates and joint ventures		(25,382	)		172,447
Gain on revaluation of deferred payment liability		(16,900	)		(172,024	)
Foreign exchange gain		(310,997	)		(1,691	)
Gain on settlement of accounts payable		(622,413	)		-
Provisions		241,066			159,250
Changes in working capital:
Changes in trade and other receivables		16,644,565			5,793,769
Changes in prepaid expenses		924,542			542,369
Changes in accounts payable and accrued liabilities		(16,128,250	)		(4,105,906	)
Changes in contract liabilities		(2,189,586	)		(644,729	)
Changes in income tax		110,400			439,202
Income tax paid		(23,152	)		(115,201	)
Net cash used in operating activities		(4,797,117	)		(2,599,290	)
Cash flows from investing activities
Acquisition of intangible assets		-			(27,488	)
Acquisition of property and equipment		(994	)		(18,531	)
Net cash used in investing activities		(994	)		(46,019	)
Cash flows from financing activities
Proceeds from long-term debt		496,252			-
Repayment of long-term debt		(717,608	)		(1,088,235	)
Repayment of other long-term debt		-			(2,968	)
Lease payments		(208,370	)		(265,523	)
Net cash used in financing activities		(429,726	)		(1,356,726	)
Foreign exchange effect on cash		94,953			53,428
Net change in cash		(5,132,884	)		(3,948,607	)
Cash, beginning of period		6,851,966			7,415,516
Cash, end of period	$	1,719,082		$	3,466,909

Enthusiast Gaming Holdings Inc.
EBITDA and Adjusted EBITDA
For the three months ended March 31, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
		For the three months ended
		March 31, 2024			March 31, 2023
Gross margin	$	14,076,159		$	16,765,558
Operating expenses		(15,526,240	)		(25,231,120	)
Share-based compensation		(1,998,257	)		1,130,331
Amortization and depreciation		715,494			3,338,023
EBITDA		(2,732,844	)		(3,997,208	)
Severance		584,198			60,985
Listing fees & D&O insurance specific to the Company's Nasdaq listing		379,035			881,238
Adjusted EBITDA		(1,769,611	)		(3,054,985	)