Enthusiast Gaming Achieves Profitability, Reports Q3 2024 Financial Results

TORONTO, Nov. 14, 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 September 30, 2024 (“Q3 2024”).

“This quarter marks a transformative milestone for the Company, achieving our first profitable quarter on an Adjusted EBITDA basis,” said Adrian Montgomery, Interim CEO of Enthusiast Gaming. “This accomplishment is a direct result of the strategic refocusing efforts we began in Q1 and our relentless pursuit of operational efficiencies—all achieved without compromising the growth of our communities or the quality of our content. By optimizing our operations, streamlining costs, and prioritizing high-margin areas, we have positioned Enthusiast Gaming for a future of sustainable growth on a solid foundation, evolving into a more efficient and higher-margin company, and, most importantly, a consistently and increasingly profitable business. This optimized structure means that as our reach expands, our profitability grows right alongside it, allowing us to turn each interaction into meaningful value. We’re no longer just capturing attention; we’re transforming it into tangible returns that fuel our long-term success.”

Felicia DellaFortuna, CFO of Enthusiast Gaming, added, “This quarter we saw significant improvements across core financial and operational metrics, reaching profitability on an Adjusted EBITDA basis and advancing our balance sheet. With over $20 million in cost savings year-to-date and gross margin expansion to 70.3%, we’re positioned for scalable profitability and growth.”

Financial Highlights for Q3 2024

  • Revenue of $16.8 million, compared to $45.6 million in Q3 2023, with the vast majority of the decline being attributable to the strategic deprioritization of the low margin video platform revenue.
  • Gross profit of $11.8 million, compared to $16.7 million in Q3 2023, with gross margin expanding to 70.3% from 36.7% in the year ago period.
  • Operating expenses of $12.7 million, a $12.3 million year-over-year decrease from $25.0 million in Q3 2023 as a result of strategic initiatives taken to establish an efficient and scalable operating model in March 2024.
  • Adjusted EBITDA profit of $0.1 million, a $3.6 million improvement compared to an Adjusted EBITDA loss of $3.5 million in Q3 2023
  • Net loss and comprehensive loss of $7.3 million in Q3 2024 compared to $57.2 million in Q3 2023.

Business Highlights for Q3 2024

  • Financing: On July 12, 2024, the Company secured $20 million of funding by way of a four-year non-revolving term loan, strengthening its balance sheet and providing significant growth capital.
  • Platform Engagement and Subscriber Growth: The Company’s key owned and operated properties saw sustained engagement and growth. Overall web pageviews across all web properties increased to 1.9 billion in Q3 2024 from 1.8 billion in Q2 2024. The web platform also saw increases in both unique visitors and time spent on site, reflecting the ability to grow and engage the Company’s audience. The Sims Resource (TSR) has seen continuous subscriber growth, with this month marking the sixth consecutive month of increases after a period of stagnation, reaffirming TSR’s role as a strong driver of recurring revenue. Icy Veins also performed well, benefiting from the launch of Blizzard’s World of Warcraft expansion: The War Within, which helped drive record user activity on the site and further cemented Icy Veins as the go-to destination for Blizzard game enthusiasts.
  • Strategic Partnerships with NFL and NHL: The Company’s partnership with the NFL continued to exceed expectations, with six episodes of NFL Tuesday Night Gaming airing in Q3 under a new program format. These episodes generated a 467% year-over-year increase in impressions, reaching 92.7 million impressions in Q3 2024 compared to 16.4 million in Q3 2023, demonstrating the resonance of the new content format with its target audiences. Building on this success, the Company is preparing to launch NHL Puck 'N Play in Q1 2025, allowing it to engage the NHL’s loyal fanbase and expand its presence in professional sports partnerships.
  • Direct Sales: The direct sales team underwent a major rebuilding effort this year, and is now beginning to see promising indicators of growth. Amazon, the Company’s largest direct sales client this year, increased its spend by 107% over Q2. The media mix has shifted back to core strengths, with custom sponsorships making up 56% of direct sales in Q3, up from 28% in Q2. This shift to high-value campaigns underscores the positive impact of the direct sales restructuring and reflects the strength of the Company’s relationships with top-tier advertisers.
  • Event Growth and Engagement: PocketGamer Connects (PGC) continued to establish itself as a leading industry event. The Mobile Games Awards, held in Germany in Q3, drew record attendance, celebrating the best in mobile gaming. The Company’s PGC Helsinki event, which moved from Q3 to Q4 in 2024, showed strong pre-sales during Q3 and is expected to boost event-driven revenue further in Q4.
  • Luminosity Gaming’s Event Success: Luminosity Gaming’s live events also performed well, with its second invitational Super Smash Bros. Ultimate event of the year drawing over 600,000 hours watched and peaking at 60,000 concurrent viewers during the grand finals, demonstrating Luminosity’s strength as a leading esports brand that can deliver high-engagement content for fans and valuable exposure for sponsors.
  • Fantasy Football Scout Expands Offerings: The Company announced that Fantasy Football Scout, the UK’s leading fantasy football advice service and a subsidiary of the Company, entered into a partnership with the English Football League (the “EFL”) to promote and support Fantasy EFL, a new fantasy game mode launched by the EFL for the 2024/2025 season.

Third Quarter 2024 Results Comparison

Revenue was $16.8 million in Q3 2024, a 63% decrease compared to $45.6 million in Q3 2023. Media and Content revenue was $11.9 million in Q3 2024, a 70% decrease from $39.8 million in Q3 2023. The Company’s strategic decision to de-prioritize the lower margin video platform revenue accounted for $21.3 million of the $28.0 million reduction. Direct Sales (the majority of which is included in media and content revenue) decreased from $9.8 million in Q3 2023 to $4.8 million in Q3 2024 mainly due to a lower number of ramped sellers than the year ago period, contributing $5.0 million to the decline in revenue. Esports and Entertainment revenue remained flat year-over-year at $1.9 million. Subscription revenue decreased from $3.7 million in Q3 2023 to $2.8 million in Q3 2024 in part due to change in mix of subscribers and lower subscriber count year-over-year on The Sims Resource and in part due to the sale of certain non-core, non-profitable assets in April 2024.

Gross profit was $11.8 million in Q3 2024, a 30% decrease compared to $16.7 million in Q3 2023. Gross margin increased to 70.3% in Q3 2024 from 36.6% in Q3 2023.

Adjusted EBITDA profit was $0.1 million in Q3 2024 compared to an Adjusted EBITDA loss of $3.5 million in Q3 2023.

Net loss $6.7 million, or $(0.04) per share, in Q3 2024, compared to $59.1 million, or $(0.38) per share, in Q3 2023.

Organizational Updates

The Company is pleased to announce that Mr. Scott O’Neil has been appointed as Chair of the Board of Directors of the Company. Mr. O’Neil is currently the CEO of Merlin Entertainment, a global leader in branded entertainment destinations, servicing over 60 million guests every year, and has also led some of the top athletic brands in the world, including New York Knicks - NBA, New York Rangers - NHL, Philadelphia Eagles - NFL and the Philadelphia 76ers - NBA. He has served on the Board of Directors of the Company since 2022.

Investor Conference Call

Management will host a conference call and webcast on Thursday, November 14, 2024, at 5 p.m. ET to review and discuss its Q3 2024 results. Conference call details:

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-GAAP Measures

This press release references certain non-GAAP measures, including Adjusted EBITDA, as described below. These non-GAAP measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP 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 GAAP 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-GAAP 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 and nine months ended September 30, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
     For the three months ended For the nine months ended
     September 30,
2024		  September 30,
2023		  September 30,
2024		  September 30,
2023		 
            
 Revenue $16,778,275 $45,558,271 $54,811,148 $131,037,006 
 Cost of sales  4,983,390  28,821,750  19,209,568  82,552,235 
 Gross margin  11,794,885  16,736,521  35,601,580  48,484,771 
 Operating expenses         
  Professional fees  293,141  674,299  1,191,229  1,817,698 
  Consulting fees  170,000  1,679,734  2,099,345  4,583,686 
  Advertising and promotion  218,340  554,247  941,700  2,948,971 
  Office and general  1,071,754  2,068,666  2,646,833  6,290,787 
  Annual general meeting legal and advisory costs  -  -  -  - 
  Salaries and wages  5,760,452  8,814,047  19,519,959  27,953,381 
  Technology support, web development and content  4,031,457  6,662,381  11,136,148  16,115,371 
  Esports player, team and game expenses  464,723  680,637  1,641,886  1,961,799 
  Foreign exchange (gain) loss  (66,649) (43,052) 74,885  94,356 
  Share-based compensation  80,084  1,364,059  (1,540,396) 4,282,880 
  Amortization and depreciation  680,107  2,562,229  2,111,568  8,786,327 
 Total operating expenses  12,703,409  25,017,247  39,823,157  74,835,256 
            
 Other expenses (income)         
  Goodwill impairment  -  44,822,575  -  44,822,575 
  Intangible asset impairment  -  6,838,060  -  6,838,060 
  Investment in associates impairment  -  -  26,497  - 
  Other long-term asset impairment  -  -  1,098,506  - 
  Transaction costs  1,908,963  -  1,908,963  - 
  Share of net loss (income) from investment in associates and joint ventures 278  (138,339) (18,627) (72,169)
  Interest and accretion  573,960  617,653  1,760,484  1,833,378 
  Loss (gain) on revaluation of deferred payment liability  39,882  413,044  (23,486) 615,121 
  Gain on sale of assets held for sale  -  -  (344,852) - 
  Loss on disposal of property and equipment  -  -  25,997  - 
  Loss on revaluation of long-term debt  3,385,798  -  3,385,798  - 
  Loss on modification of long-term debt  4,893  -  401,951  - 
  Interest income  (281) (575) (5,730) (63,296)
 Net loss before income taxes  (6,822,017) (60,833,144) (12,437,078) (80,324,154)
            
 Income taxes         
  Current tax expense  55,392  171,346  182,529  397,117 
  Deferred tax expense (recovery)  (181,647) (1,940,134) (208,820) (2,703,623)
 Net loss for the period  (6,695,762) (59,064,356) (12,410,787) (78,017,648)
            
 Other comprehensive (loss) income         
 Items that may be reclassified to profit or loss         
  Foreign currency translation adjustment  (639,611) 1,815,312  826,090  (319,937)
 Net loss and comprehensive loss for the period $(7,335,373)$(57,249,044)$(11,584,697)$(78,337,585)
            
 Net loss per share, basic and diluted $(0.04)$(0.38)$(0.08)$(0.51)
 Weighted average number of common shares          
  outstanding, basic and diluted  155,759,149  154,393,280  155,719,820  152,786,876 
            


      
Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Financial Position
As of September 30, 2024 and December 31, 2023
(Unaudited - Expressed in Canadian Dollars)
     September 30, 2024  December 31, 2023 
        
 ASSETS     
 Current     
  Cash $6,879,121 $6,851,966 
  Trade and other receivables  11,020,303  31,502,732 
  Income tax receivable  42,714  31,251 
  Prepaid expenses  2,683,169  1,820,144 
 Total current assets  20,625,307  40,206,093 
 Non-current      
  Property and equipment  197,707  124,640 
  Right-of-use assets  891,108  1,441,149 
  Investment in associates and joint ventures  -  2,888,730 
  Long-term portion of prepaid expenses  139,358  182,108 
  Intangible assets  80,714,656  85,421,227 
  Goodwill  106,658,256  105,868,081 
 Total assets $209,226,392 $236,132,028 
        
 LIABILITIES AND SHAREHOLDERS' EQUITY    
 Current     
  Accounts payable and accrued liabilities $14,674,198 $47,101,272 
  Contract liabilities  4,950,661  6,078,950 
  Income tax payable  11,036  274,924 
  Current portion of long-term debt  19,711,993  21,888,597 
  Current portion of deferred payment liability 2,247,287  82,231 
  Current portion of lease liabilities  679,698  740,212 
  Current portion of other long-term debt  -  9,668 
 Total current liabilities  42,274,873  76,175,854 
 Non-current      
  Long-term debt  19,933,000  - 
  Long-term portion of deferred payment liability -  2,083,262 
  Long-term portion of lease liabilities  455,289  938,845 
  Other long-term debt  -  140,613 
  Deferred tax liability  13,917,182  14,076,780 
 Total liabilities $76,580,344 $93,415,354 
        
 Shareholders' Equity     
  Share capital  453,201,338  444,474,076 
  Warrants reserve  3,054,467  - 
  Contributed surplus  25,609,531  35,877,189 
  Accumulated other comprehensive income  8,028,066  7,201,976 
  Deficit  (357,247,354) (344,836,567)
 Total shareholders' equity   132,646,048  142,716,674 
 Total liabilities and shareholders' equity $209,226,392 $236,132,028 


      
      
Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the nine months ended September 30, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
    September 30, 2024  September 30, 2023 
       
 Cash flows from operating activities     
 Net loss for the period $(12,410,787)$(78,017,648)
 Items not affecting cash:     
 Goodwill impairment  -  44,822,575 
 Intangible asset impairment  -  6,838,060 
 Investment in associates impairment  26,497  - 
 Other long-term asset impairment  1,098,506  - 
 Amortization and depreciation  2,111,568  8,786,327 
 Share-based compensation  (1,540,396) 4,282,880 
 Accretion  (74,639) 179,452 
 Deferred tax expense (recovery)  (208,820) (2,703,623)
 Share of net income from investment in associates and joint ventures (18,627) (72,169)
 Gain on sale of assets held for sale  (344,852) - 
 (Gain) loss on revaluation of deferred payment liability  (23,486) 615,121 
 Foreign exchange gain  (585,334) (115,291)
 Loss on disposal of property and equipment  25,997  - 
 Gain on settlement of accounts payable  (622,413) - 
 Loss on modification of long-term debt  401,951  - 
 Loss on revaluation of long-term debt  3,385,798  - 
 Transaction costs  1,908,963  - 
 Provisions  18,212  139,856 
 Changes in working capital:     
 Changes in trade and other receivables  21,441,444  7,048,454 
 Changes in prepaid expenses  (663,169) 23,820 
 Changes in accounts payable and accrued liabilities  (31,604,393) 7,743,519 
 Changes in contract liabilities  (639,078) (561,322)
 Changes in income tax receivable and payable  207,083  755,959 
 Income tax paid  (482,434) (112,887)
 Net cash used in operating activities  (18,592,409) (346,917)
       
 Cash flows from investing activities     
 Proceeds from sale of assets held for sale  2,693,339  - 
 Distribution from investment in associates, net of adjustments 1,416,830  - 
 Proceeds from redemption of investments  -  75,000 
 Repayment of deferred payment liability  (85,700) (844,350)
 Acquisition of intangible assets  -  (27,488)
 Acquisition of property and equipment  (182,259) (20,430)
 Net cash from (used in) investing activities  3,842,210  (817,268)
       
 Cash flows from financing activities     
 Proceeds from long-term debt, net of transaction costs  20,143,122  539,329 
 Repayment of long-term debt  (4,716,851) (3,264,705)
 Repayment of other long-term debt  (173,858) (9,883)
 Lease payments  (622,748) (722,139)
 Net cash from (used in) financing activities  14,629,665  (3,457,398)
       
 Foreign exchange effect on cash  147,689  13,580 
 Net change in cash  27,155  (4,608,003)
 Cash, beginning of period  6,851,966  7,415,516 
 Cash, end of period $6,879,121 $2,807,513 
       


        
Enthusiast Gaming Holdings Inc.
EBITDA and Adjusted EBITDA
For the three and nine months ended September 30, 2024 and 2023
(Unaudited - Expressed in Canadian Dollars)
    For the three months ended For the nine months ended
    September 30, 2024  September 30, 2023  September 30, 2024  September 30, 2023 
           
 Gross margin $11,794,885 $16,736,521 $35,601,580 $48,484,771 
 Operating expenses  (12,703,409) (25,017,247) (39,823,157) (74,835,256)
 Share-based compensation  80,084  1,364,059  (1,540,396) 4,282,880 
 Amortization and depreciation 680,107  2,562,229  2,111,568  8,786,327 
 EBITDA  (148,333) (4,354,438) (3,650,405) (13,281,278)
 Severance  20,928  375,445  726,556  1,431,993 
 Listing fees & D&O insurance specific to the Company's Nasdaq listing 201,478  429,797  821,448  1,841,152 
 Adjusted EBITDA $74,073 $(3,549,196)$(2,102,401)$(10,008,133)

11/14/2024 16:30 -0500

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