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Enthusiast Gaming Reports Third Quarter 2021 Results

2021-11-10 16:15 ET - News Release

Record revenue of $43.3 million, including direct sales of $6.8 million
Record gross profit of $10.1 million
Paid subscribers grew to an all-time high of 207,000

TORONTO, Nov. 10, 2021 (GLOBE NEWSWIRE) -- Enthusiast Gaming Holdings Inc. (NASDAQ:EGLX; TSX: EGLX), (“Enthusiast Gaming” or the “Company”), today announced financial results for the three and nine months ended September 30, 2021. All amounts are stated in Canadian dollars unless otherwise indicated.

Third Quarter 2021 Financial and Operating Highlights

  • Revenue of $43.3 million, a 165% increase vs revenue of $16.3 million in Q3 2020
  • Direct sales of $6.8 million, a 580% increase vs direct sales of $1.0 million in Q3 2020
  • Gross profit of $10.1 million, a 146% increase vs gross profit of $4.1 million in Q3 2020
  • Paid subscribers of 207,000 as at September 30, 2021, an 85% increase vs paid subscribers of 112,000 as at September 30, 2020
  • Cash balance of $33.5 million as at September 30, 2021, as compared to $4.3 million as at December 31, 2020
  • Completed acquisitions of GameKnot and Addicting Games
  • Net cash used in operating activities of $3.8 million vs $3.7 million in Q3 2020
  • Net and comprehensive loss of $12.3 million, or $0.10 per common share, vs $8.0 million and $0.10, for Q3 2020

“This has been an outstanding quarter for Enthusiast Gaming across our key categories,”commented Adrian Montgomery, CEO of Enthusiast Gaming.“Ongoing momentum in direct sales, the acquisition of Addicting Games, and the renewal and addition of key partners continues to power revenue and gross profit numbers that demonstrate the strength of our strategy. Our team’s ability to continue acquiring accretive properties, attract quality partners, and deliver the best fan experience through our flywheel of content, creators, and communities continues to deliver against and exceed expectations.”

Certain information provided in this news release is extracted from the unaudited condensed consolidated interim financial statements (the “Financial Statements”) and Management’s Discussion & Analysis (“MD&A”) of the Company for the three and nine months ended September 30, 2021 and should be read in conjunction with them. It is only in the context of the 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 can be found under the Company’s profile on SEDAR and EDGAR.

Earnings Announcement and Supplemental Information

Management will host a conference call and webcast on November 10, 2021, at 5:00 p.m. ET to review and discuss the third quarter 2021 results.

Conference call dial-in details:
North America (toll-free): +1 844-826-3035
International: +1 412-317-5195
Conference ID: 10161588

A live webcast can be accessed 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 section of the Enthusiast Gaming website.

About Enthusiast Gaming

Enthusiast Gaming is building the largest media platform for video game and esports fans to connect and engage worldwide. Combining the elements of its four core pillars; Media, Talent, Esports 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.

Contacts

Enthusiast Gaming Investor Relations:
Eric Bernofsky, Chief Corporate Officer
investor@enthusiastgaming.com

Media Relations:
Ashley Stanhope, Provident Communications
ashley@providentcomms.com
416-303-1498

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 anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations and future actions of the Company. 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 information is based on currently available competitive, financial and economic data and operating plans, strategies or beliefs as of the date of this news release, but involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of Enthusiast to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors may be based on information currently available to Enthusiast, including information obtained from third-party industry analysts and other third-party sources, and are based on management's current expectations or beliefs regarding future growth, results of operations, future capital (including the amount, nature and sources of funding thereof) and expenditures. Any and all forward-looking information contained in this press release is expressly qualified by this cautionary statement. Trading in the securities of the Company should be considered highly speculative.

Neither the TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this release.


     
Enthusiast Gaming Holdings Inc.    
Condensed Consolidated Interim Statements of Financial Position  
As at September 30, 2021 and December 31, 2020    
(Unaudited - Expressed in Canadian Dollars)    
       
    September 30, 2021  December 31, 2020 
       
 ASSETS    
 Current    
  Cash$33,526,534 $4,323,823 
  Trade and other receivables 27,351,305  22,424,596 
  Investments 133,466  124,998 
  Loans receivable 176,931  194,389 
  Income tax receivable 290,077  290,077 
  Prepaid expenses 3,098,610  576,802 
 Total current assets 64,576,923  27,934,685 
 Non-current     
  Property and equipment 279,562  354,850 
  Right-of-use asset 2,731,941  2,848,400 
  Long-term investment -  2,606,100 
  Investment in associates and joint ventures 921,235  1,026,910 
  Long-term portion of prepaid expenses 263,224  263,196 
  Intangible assets 101,540,147  81,106,007 
  Goodwill 156,181,672  106,181,086 
 Total assets$326,494,704 $222,321,234 
       
 LIABILITIES AND SHAREHOLDERS' EQUITY    
 Current    
  Accounts payable and accrued liabilities$27,136,558 $23,602,547 
  Contract liabilities 3,455,887  1,625,594 
  Income tax payable 374,364  - 
  Current portion of long-term debt 9,766,060  1,250,000 
  Current portion of deferred payment liability 10,648,211  636,600 
  Current portion of convertible debentures -  7,546,453 
  Current portion of lease contract liabilities 604,094  578,330 
  Current portion of other long-term debt 11,176  - 
 Total current liabilities 51,996,350  35,239,524 
 Non-current     
  Long-term debt -  21,651,956 
  Long-term portion of deferred payment liability 5,991,777  529,124 
  Long-term lease contract liabilities 2,266,045  2,308,336 
  Vendor-take-back loan -  5,559,250 
  Other long-term debt 137,158  - 
  Deferred tax liability 20,880,115  15,161,987 
 Total liabilities$81,271,445 $80,450,177 
       
 Shareholders' Equity    
  Share capital 360,603,409  232,616,997 
  Contributed surplus 21,563,566  7,494,164 
  Accumulated other comprehensive income 49,007  45,428 
  Deficit (136,992,723) (98,285,532)
 Total shareholders' equity  245,223,259  141,871,057 
 Total liabilities and shareholders' equity$326,494,704 $222,321,234 
       


Enthusiast Gaming Holdings Inc.        
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss    
For the three and nine months ended September 30, 2021 and 2020        
(Unaudited - Expressed in Canadian Dollars)        
    For the three months ended For the nine months ended
   September 30,
2021
September 30,
2020
September 30,
2021
September 30,
2020
           
 Revenue        
  Revenue$43,341,907 $16,328,946 $110,421,843 $30,287,614 
  Gain on player buyout -  -  -  204,764 
 Total revenue 43,341,907  16,328,946  110,421,843  30,492,378 
 Cost of sales 33,216,294  12,268,906  86,345,922  19,917,990 
 Gross margin 10,125,613  4,060,040  24,075,921  10,574,388 
 Operating expenses        
  Professional fees 434,862  549,942  2,385,837  1,463,887 
  Consulting fees 725,408  1,336,461  3,111,761  3,725,135 
  Advertising and promotion 609,587  215,410  2,465,529  701,901 
  Office and general 1,963,965  625,296  4,836,416  2,077,937 
  Salaries and wages 6,574,338  2,304,003  16,768,850  5,191,402 
  Technology support, web development and content 3,146,453  1,163,126  7,239,996  3,397,877 
  Esports player, team and game expenses 1,615,655  760,844  4,609,978  2,244,640 
  Foreign exchange gain (1,060,724) (23,125) (2,136,979) (71,394)
  Share-based compensation 4,971,949  203,963  14,690,294  873,211 
  Amortization and depreciation 2,372,839  1,042,072  5,668,276  3,390,604 
 Total operating expenses 21,354,332  8,177,992  59,639,958  22,995,200 
           
 Other expenses (income)        
  Transaction costs 301,343  1,621,775  510,472  1,621,775 
  Share of loss from investment in associates        
  and joint ventures 158,415  808,011  230,675  2,080,358 
  Interest and accretion 430,538  1,264,594  1,702,839  3,951,379 
  Change in fair value of investment 288,093  (374,065) 444,764  (211,050)
  Loss on modification of long-term debt -  806,879  -  806,879 
  Gain on repayment of long-term debt -  -  (39,502) - 
  Loss on settlement of vendor-take-back loan -  -  316,241  - 
  Loss on revaluation of deferred payment liability 33,162  -  122,346  - 
  Interest income (9,315) (14,775) (50,546) (91,305)
 Net loss before income taxes (12,430,955) (8,230,371) (38,801,326) (20,578,848)
           
 Income taxes        
  Current tax expense 127,101  9,139  161,138  20,520 
  Deferred tax recovery (130,212) (143,623) (255,273) (585,818)
 Net loss for the period (12,427,844) (8,095,887) (38,707,191) (20,013,550)
           
 Other comprehensive income (loss)        
 Items that may be reclassified to profit or loss        
  Foreign currency translation adjustment 124,873  62,420  3,579  66,039 
 Net loss and comprehensive loss for the period$(12,302,971)$(8,033,467)$(38,703,612)$(19,947,511)
 Net loss and comprehensive loss per share,         
  basic and diluted $(0.10)$(0.10)$(0.33)$(0.26)
 Weighted average number of common shares         
  outstanding, basic and diluted 126,395,192  83,147,816  118,514,822  76,651,219 
           


Enthusiast Gaming Holdings Inc.    
Condensed Consolidated Interim Statements of Cash Flows    
For the nine months ended September 30, 2021 and 2020
(Unaudited - Expressed in Canadian Dollars)    
   For the nine months ended
   September 30, 2021 September 30, 2020
      
 Cash flows from operating activities    
 Net loss for the period$(38,707,191)$(20,013,550)
 Items not affecting cash:    
 Amortization and depreciation 5,668,276  3,390,604 
 Share-based compensation 14,690,294  873,211 
 Interest and accretion 606,060  1,378,077 
 Deferred tax recovery (255,273) (585,818)
 Gain on player buyout -  (204,764)
 Foreign exchange gain (101,302) (7,050)
 Gain on repayment of long-term debt (39,502) - 
 Loss on settlement of vendor-take-back loan 316,241  - 
 Loss on revaluation of deferred payment liability 122,346  - 
 Capitalized interest and success fee -  1,494,910 
 Shares for services 110,565  138,172 
 Loss on modification of long-term debt -  806,879 
 Provisions -  90,366 
 Change in fair value of investment 444,764  (211,050)
 Share of loss from investment in associates and joint ventures 230,675  2,080,358 
 Changes in working capital:    
 Changes in trade and other receivables (3,896,016) (1,916,067)
 Changes in prepaid expenses (2,584,504) 63,250 
 Changes in loans receivable 37,500  - 
 Changes in accounts payable and accrued liabilities 2,383,538  2,288,492 
 Changes in contract liabilities 881,756  (387,411)
 Changes in income tax receivable (149,468) (285,480)
 Net cash used in operating activities (20,241,241) (11,006,871)
      
 Cash flows from investing activities    
 Cash paid for mergers and acquisitions (27,071,176) (10,500,000)
 Cash acquired from mergers and acquisitions 489,107  281,125 
 Proceeds from disposal of investment -  680,000 
 Proceeds from disposal of intangible assets -  204,764 
 Investment in associates and a joint venture (125,000) (2,169,750)
 Acquisition of property and equipment (3,398) (4,871)
 Net cash used in investing activities (26,710,467) (11,508,732)
      
 Cash flows from financing activities    
 Proceeds from the issuance of shares for offerings, net of    
 transaction costs 95,150,810  15,609,257 
 Proceeds from long-term debt 944,787  - 
 Repayment of long-term debt (14,023,470) - 
 Proceeds from exercise of warrants -  2,354,246 
 Proceeds from exercise of options 784,431  49,366 
 Repayment of vendor-take-back loan (6,158,329) - 
 Lease payments (531,085) (221,764)
 Net cash provided by financing activities 76,167,144  17,791,105 
      
 Foreign exchange effect on cash (12,725) 39,176 
 Net change in cash 29,202,711  (4,685,322)
 Cash, beginning of period 4,323,823  13,211,722 
 Cash, end of period$33,526,534 $8,526,400 
      


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