Esports Entertainment reports fourth quarter revenue of $11.7 Million

Finance News

Esports Entertainment Group has announced its financial results for the fiscal 2022 fourth quarter ended June 30, 2022.

Net revenue of $11.7 million, an increase of $2.9 million compared to fiscal 4Q ’21, and a 25.4% sequential decrease from net revenue of $15.7 million in fiscal 3Q ’22. Gross profit of $6.8 million, an increase of $1.6 million compared to fiscal 4Q ’21, and a 27.8% sequential decrease from $9.4 million in fiscal 3Q ’22.

Gross margin of 58.0% compared to 59.0% in fiscal 4Q ’21. GAAP net loss to common shareholders of $4.1 million, or a loss of $0.10 per share, inclusive of a $7.9 million asset impairment charge and a benefit recognized for changes in fair value of the derivative and warrant liabilities of $14.0 million. This compares to a net loss of $4.8 million, or a loss of $0.23 per share in fiscal 4Q ’21, and a net loss to common shareholders of $63.8 million, or a loss of $2.11 per share, in fiscal 3Q ’22 inclusive of a $38.6 million asset impairment charge and $20.6 million for a derivative debt liability.

During the fiscal fourth quarter, the Company began a strategic review focused on its operations and overall efficiency to help improve its short-term performance while setting it a path for a long-term success. The Company implemented a number of initiatives including a reduction of its workforce, the removal of duplicative functions, de-emphasizing parts of the business which do not support its long-term strategic plans, and implementing a more ROI-focused approach to marketing spend, among others. These changes have already resulted in a reduction of the monthly cash burn rate.

The Company also continues to work through various options intended to monetize its non-strategic assets and improve its ability to adequately support all aspects of the business. These efforts have resulted in the sale of the Helix esports centers, a transaction that has eliminated excess cost and has mitigated risk of having to invest and incur cost associated with operating and owning real estate. The Company also entered into a letter of intent to sell its Spanish iGaming business as it looks to focus on its core iGaming markets.

Esports Entertainment Group ended fiscal 2022 with approximately $2.5 million in available cash, $35.0 million of principal outstanding under its Senior Convertible Note that matures in June of 2023, and $7.8 million in cumulative redeemable convertible preferred shares. The Company’s $20 million ATM equity program expired in September 2022 and the Company does not plan to sign a new agreement at this time.

Grant Johnson, CEO of Esports Entertainment Group, commented, “We are pleased with the initial positive impact of our restructuring efforts and the progress we are making in our strategic pivot towards further leveraging our esports assets, including BETGROUND, our proprietary esports player-versus-player skill betting platform. However, there is still much work to be done and many challenges ahead to right-size the business, lower our cash burn and further reduce our debt and our reliance on capital raises.”