Q4 2019 Earnings Call
Greetings welcome to the I'll, let you sports Entertainment fourth quarter 2000, <unk> earnings Conference call.
At this time, all participants are they listen only mode.
A question I think that's recession will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero under telephone Keypad. Please note. This conference is being recorded it is not my pleasure to introduce your host lots of glass and with Investor Relations for I'll, Let you Sports Entertainment. Please go ahead.
Thank you operator, good afternoon, and welcome to our sport Entertainments 2019 fourth quarter and full year results conference call.
Moving on the call today is our de sport entertainments, Chief Executive Officer, Fracking and Chief Financial Officer Cody Huh.
The company's president and long time, W.P.P. CEO, Adam Perked up.
And John Hannigan from who is leading the sports operations is also available for the question answer session.
Before I turn the call over to management. Please remember that our prepared remarks and responses to questions may contain forward looking statements.
Words, such as May will expect intend plan believe seek could.
Estimate judge.
Targeting.
Should anticipate goal and variations of these words and similar expressions are intended to identify forward looking statements.
Actual results could differ materially from those implied by such forward looking statements due to a variety of factors discussed in the Companys public filings.
Putting into risk factors and documents filed with Securities and Exchange Commission.
Although the company believes these expectations reflected in such forward looking statements are based on a reasonable assumptions. It can give no assurance that its expectations will be a pain.
The company undertakes no obligation to update any forward looking statement, whether as a result of new information future events or otherwise. In addition, certain other financial information presented in this call represent non-GAAP financial measures. The company's earnings release, which was issued this afternoon and is available on the company's web.
Slide presents reconciliations to the appropriate GAAP measure.
Had an explanation of why the company believes that non-GAAP financial measures are useful to investors.
With that it's now my pleasure to turn the call over to Allied export entertainments.
Yeah, so frightening right.
Thank you locker and thank you everyone for joining us this afternoon.
I will begin today's call with a review operational highlights for the fourth quarter and full year 2019, Tony Hawk Althea, though will follow by providing additional details on the company's fourth quarter and full year financial results.
After our prepared remarks, we will open up the call to your question.
Oh, I eat what entertainment wrapped up a transformational year that included a strong fourth quarter highlights by robust top line growth and continued execution of our strategic initiatives to help our business expansion in the quarters in years ahead.
Fourth quarter total revenue, all 6.5 million increased 19.5% compare with the fourth quarter last year.
Driven by growth in both our E sports and poker businesses.
Excellent fourth quarter results capped off with an impressive performance for the full year, which included a 26.5% increase in total revenue along with a boutique with any improvement in adjusted EBITDA from a year ago.
In addition to our strong financial performance. We also continued to make great progress with our existing partnerships with Simon property and you get back up and with this momentum we announced a new relationship with Brookfield property.
With that nipigon and rapidly growing revenue and numerous key strategic partnership.
Oh I used what entertainment continues to carve out a valuable position in the exciting and boycotting equally industry and the same time lococo tool or WPP continues to steadily grow its business and half it very promising outlook.
His back a number of crackers are coming together that if not confident that the future off W.P.D. have never be writer.
With respect to E sports I'll focus is not about.
Publishing games owning he is that we believed that opportunity it drives extend sustainable and scalable grow through targeting that general population is up gamers and complementing game publishers by catering to the end of human aspect of easily.
That's not our strategy happened built around three strategic pillar, which are for.
In person experiences.
This includes losing live event now fixed and mobile facilities around the world, where they can be viewed lie 5000 dolphins and streamed online.
Significantly increasing the viewership potential.
Second we then produced content all select live experiences that is delivered over multiple distribution block or.
With a focus on social channel.
This content provide opportunities to increase the overall viewership to tens of millions and third we intend to leverage all content by way of embedded messages in order to convert a percentage of that viewership to participate in a interactive services, including out to be built on line.
For.
Similar to what we have done that wed WPP.
Importantly.
Each of the three pillars of our strategy, though on one and a one and another two work synergistically together.
Which is a study with a proven track record office that.
In Britain experiences multi black on content and interactive services.
I've been the go to market strategy that the W.P.T.
Has effectively deployed in the poker industry for nearly two decades.
As we continue the executed tobacco strategy for WPP, we are also applying it.
To that much larger and more rapidly growing E sports industry.
With that let turn it to the highlights.
About fourth quarters result, as well at an update on the progress, which we have achieved on offer teach partnerships.
The first of the three pillars in person experiences.
Continued to perform well during the fourth quarters generating solid year over year revenue growth.
In fact for the full year in 2019 revenue from in person experiences grew 36% over the over the prior year.
Without without this segment of our business is currently the most developed and recognizable duty our flagship facility at Vegas, the hybrid E Sports Arena at Loxa Hotel and casino.
I'll know about useless trucks and local tour event around the globe.
During the fourth quarter, we how 70 event at the high break he's whats Irina.
This is up 20% from 65 event in the fourth quarter last year with notable events, including the league of Legends Allstar 2019 capped call North America Regional final Simon Cop Grand final, so caliber well invitational and the big block on the Wall Championship.
I'm pleased to report that the total number of apartment you've ended the fourth quarter across a lot easier equal system and that this has increased by 54% and hundred 68% quarter over quarter.
Respectively with the largest contribution of our new at this has been coming from the Simon Cox.
In addition.
Hi, great equal truck in North America, and in Europe were deployed at night events, including Simon Cup.
Qualifiers.
Both the fat Las Vegas Bowl, driven hack I'll, let Tom Andrews Act winter.
Invention and DGX London.
Our trucks have proven to be a very effective method of bringing the ally E sports brand into high profile event, which complement I'll stationary arena.
Also during the quarter WPP posted 17 event in seven countries around the globe that included more than 13000 participants and a cumulative accumulative price spool up 2.7 billion.
During the quarter, the number of event and participant increase year over year by 21% at 27% respectively.
With respect to WPP, I'm, particularly pleased with how expansion internationally.
Including our first ever event in Australia in Cambodia, which drew participants from 41 country.
Late in the fourth quarter, we signed an agreement with long you.
Operator off the largest network of east West centers in time.
While you will become an official affiliate member of the a bit I like what property network and serve as a valuable distribution channel to enable our youth wants to sell future products and services into the Chinese market.
This includes one used 60 million plus.
Global members in more than 800 locations across China and around the world, including facilities in United States, Australia, Singapore, and United Kingdom in Canada.
The Allied with property network was introduced in late 2018 at the world's first affiliate program for global partners interested in developing eastwood's venue and participating in our E sports event programming and got them, but that's.
In addition to our partnership with one you.
We also work with a number of venue operators to increase their E sports event programming and related offerings, Oh, great new dedicated eastward facility all together.
Portrait E sports the first affiliate program partner up the ally E Sports property network, covering Australia, and new fill that new Bill that opened its first then youre on March 13.
Plus rarely its largest shopping mall emporium in Melbourne, Australia.
At nearly 30000 square feet. The new facility is expected to be the largest video gaming and eat or entertainment venue in the south of the hemisphere.
In addition, E sports Arena, LLC, and operator of E books venue and 25% owned by our export taxes successfully expanding it in store presence in warm upsell.
Earlier this year the company unveiled that it will be expanding the number of locations with Walmart from seven at the end of 2019 to 18 by the end up at first quarter off to about a 2020.
Oh strategic relationship with Simon property.
Group also fall and Oh in person they pull out at we collaborate with the important partner to deliver east what experiences through integrated gaming venues and production facilities at the lack Simon deck destination.
During the quarter, we successfully completed the pilot season of the Simon Cop, a U.S. nationwide onshore esports tournament.
License by Epic Inc. to include coordinate.
The Simon Cop span, both online and on mall qualifying event and was marketed at 13 Simon destinations around the country.
Supported.
Via a partnership with popular E sports infrared sensors baseline over 10000 players registered with its initial Simon Cup season vying for the procedures championship, which awarded a $50 in dollar Simon shopping spree through the winter.
The program was supported by sponsors Microsoft source and Apple pay.
The sequence to the ended the quarter as part of the strategic Alliance with Simon we announced that more of Georgia located in a greater Atlanta Metro area will be the location for the first Oh I used whats venue at assignment destination.
More of Georgia, the largest shopping destination in the southeast features more than 200 shop, including specialty retail brands Department stores restaurant and cinemas.
As we will detail in upcoming announcement, the two level 13000 square facility will be a gaming and heaslip destination for players and community members all levels as part of the all I eat Whats property network. The venue will feature regular onshore and professionally what's tournament.
And events across a variety of aimed at genre.
The location will start at the regional hop in its I'll be.
It will have who brought happened streaming production capability will also offer Pcs and hospitals with daily use.
Cool food and beverage options.
Your actual retail and all I used much brands of daily event and putting them in programming.
But more importantly, this locations will be able to leverage the investment we have already made in our E Sports Arena in Las Vegas, and can be built and a fraction of the cost uplift biggest facility.
Construction afterwards to convert the current retail space I expected to begin soon with the opening of the venue anticipated in the second half a year.
In addition to the partnership with Simon.
Sequence to year end, we announced a similar strategic relationship with Brookfield property partners.
As part of this strategic investment, we will expand the Allah input on more venue concept to existing Brookfield retail locations between.
Simon and Brookfield, we now have applicability to over 400 premium locations.
Around the globe.
Currently we anticipate opening the first Brookfield locations towards the entity this year.
We look forward to updating you on our progress with both Simon and Brookfield in future calls.
The second go about this is model as month multi platform content, where we generate content for consumption on a 24 by seven basis.
This could be from content that is lightstream post produce or package.
Where we hate optionality in monetization of contact via direct distribution and sponsorship.
You saw third party distributors or various hybrid solutions.
World Poker tour happened to effectively doing this for years being globally broadcast in 25 countries and territories over 17% boot season across very network various networks, including Fox sports net.
Where the show currently aired.
In addition, wptz new National syndication deal announced for 2020 include 22 markets across the country and increased by approximately 15 million additional homes for the coming here.
With the new agreements that W.P.D. television show will now be available in 102 million households nationwide Motorola during 2019, Tvs that got a leading sports network in Mexico, and the global provider of Spanish language content launched localized.
W.P.D. programming in Mexico on free to Air Channel seven.
We estimate total global reach of WP to combat at over 200 million households.
In addition.
On the east West side of the business.
The partnership with our strategic Investor Tvs that got continues to progress.
Since June 2019, where the strategic Alliance was announced a lot you fourth has brought it E sports production expertise lies event experience and industry relationships to Mexico to exit the CBS back up in the creation of original content and execution of event.
Broadcast.
That have reach millions of consumers across the networks digital platforms.
This includes the launch of the gears a wall pro elite Latam and the highly successful gears major in Mexico City last week.
Which saw a Mexican team at the top rank of a compounded the field and attack a own broadcast palin, making a tremendous impact in the fourth world.
Finally, the interactive services Pilla model opposite the cycle well Poker tour interactive services strategy, which include it subscription based membership platform club WPP and social gaming models, including play WPP WPP gold and its partnership with Zynga.
Recent promotion continue to help drive subscription.
During the fourth quarter, we successfully implemented at the first subscription price increase in five years for club WB.
On January 15, we raised the monthly subscription rate by $3 to sub 27 95 per month.
We are pleased.
Two reports that we experienced negligible impact on subscriber total opposite the rate increase.
Moreover, generally to 2020, Mark the launch of innovative club WPP 1 million bonus promotions, where any club WPP member who wins a seat package to a main tour event on club WPP and then goes on to win the.
That event will win an extra 1 million bonus.
This club WPP 1 million promotion, along with other promotions have help attract thousands of new registrations.
On the east West side.
Although the interactive pilla it in its early days some of the developments completed for the Simon Cup last year will serve as the foundation.
Well I'll eventual b to C online is whats platform.
Longer term, we envision this becoming a subscription based online platform, where E sports player and fans can watch play and win with other members of the easiest community and toppy Eastport personality that inferences.
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Apart from the three feel that strategy. We are also very excited about several growth catalyst for WPP in particular real money gaming and Sportsbook, but which we have generated significant inbound interest and active conversation with outside parties.
To this end, we are exploring and evaluating opportunities that utilizes W.P.D. asset, but real money gaming and Sportsbook application.
These opportunities range from developing real money gaming sites to affiliate marketing program that allow us to monetize our customers and content library to generate additional leap, but real money gaming and sportsbook.
Importantly, these opportunities with require low or no capital investment, while potentially generating significant returns.
We expect to have more to say on this in future calls.
In summary.
2019, once a very productive and foundational year for all our E Sports Entertainment.
I wanted to thank everyone at the company for their hard work and dedication during a year of significant gains.
Momentum is gathering and we are all looking forward to building on this success in 2020.
With that I would like to turn the call over to Tony Huh.
Our CFO for a more detailed updates on our fourth quarter financial results Tony.
Thank you Frank good afternoon, everyone and thank you for joining us today.
As Frank mentioned, we ended the year with strong growth in each of our key strategic pillars and laid the groundwork with our strategic partnerships, which have now expanded to include Brookfield to go along with Simon and TBS Teca.
We have also been very busy working on strengthening our capital structure and liquidity, which I will talk in more detail in a moment.
Now turning to the fourth quarter and full year 2019 results in more detail.
We had a strong fourth quarter and an even stronger full year total revenues for the fourth quarter were 6.5 million up 19% year over year.
For the full year total revenues were 26.1 million, an increase of 27% year over year driven by growth in all three key strategic pillars.
Looking at these results in greater detail in person revenues for the fourth quarter totaled 2.2 million compared to 2.1 million in the prior year period, an increase of 6% year over year.
In person revenue increased year over year in our allies sports business, but was slightly offset by lower poker event revenues, primarily due to timing issues.
Multi platform content revenues totaled 2 million compared to 1.1 million in the prior year period, an increase of 74% year over year.
Our year over year revenue growth was primarily driven by increased sponsorship revenues in the W.P.T. business as well as higher W.P.T. distribution revenues and music royalties.
Interactive revenues totaled 2.3 million compared to 2.2 million in the prior year period, an increase of 4% year over year, driven by increased subscriptions and virtual product purchase as related to the W.P.T. business.
Overall fourth quarter total revenues derived from Allied exports grew to 2 million in 2019 as compared to 1.4 million in the same period in 2018, largely a result of increase revenues at the hyper X E Sports Arena Las Vegas, as well as increased revenues from the company's gaming truck event.
Revenues from W.P.T. increased to 4.5 million and Q4 2019 versus 4 million in Q4, the prior year period, driven primarily by growth in sponsorship and distribution.
For the full year 29 team total revenues derived from L.I.D. sports grew 3.3 million as compared to last year and revenues from WPP increased 2.2 million compared to last year.
Total costs and expenses for the fourth quarter were 11.6 million flat compared to the prior year period.
Cost and expenses and 29 team benefited from lower impairment expense versus the prior year period. This was offset by increased in person expenses due to our Simon Cup event in Q4, 29 team and higher SGN as a result of becoming a public company.
Net loss attributed to Allied is sports entertainment for the fourth quarter was 5.8 million an improvement from a net loss of 6.6 million in the fourth quarter last year.
And now turning to our balance sheet in detail at December 31, 2019, our cash position totaled 12.1 million, including 3.7 million of restricted cash compared to 10.5 million at December 31 2018.
Year over year, the increased cash balance was due to proceeds from the merger transaction and excludes an additional 5 million we raised through selling common shares to Brookfield in January.
Total convertible debt was 14 million at December 31, 29 team.
At the end of February we also announced that Lyle Berman Chairman of the board of Directors has committed to purchase 2 million of newly issued shares of Allied as far as common stock through our exercising an option on March nine.
The proceeds from the stock sale will be used for working capital and general corporate purposes.
Finally, I would like to spend a moment to discuss the global health crisis.
We are deeply concerned for the well being of those affected we have a strong network of employees and partners across the globe and it is our top priority to ensure the health of our colleagues and make sure. They say states safe as they deal with fair at this very difficult situation.
To date, we've had to cancel or postpone some W.P.T. and these sports events as a result of the krona virus.
Fortunately this has been isolated to a pillar one business and our pillar two and pillar three businesses remain relatively unaffected.
In fact with traditional sporting events canceled, we anticipate increased demand and pillar two and pillar three for E sports content and online E sports events.
We are currently realigning our resources to accommodate the change and it began to leverage our infrastructure and daily programming to make our esports tournament available online kicking off with an event this past weekend.
For WPP, we recently transitioned what would have previously benefits call event to the first WPP online series that will take place exclusively on the party poker online platform in May.
We believe this will prove to be a model for more online events to come and we'll continue to monitor the situation closely as it unfolds.
In summary, we are pleased with the performance of both Allied is sports NW PT, the strength and expansion of our strategic alliances and the progress were making on our key strategic pillars looking forward to 2020, we have a lot of runway for growth that have been involved in indepth discussions with multiple parties to strengthen our balance sheet and paved the way for future.
For success.
We will know now open the line for acuity operator.
Thank you we will now be conducting a question that answer session. If you would like to ask your question. Please press star one on your telephone keypad. It confirmation total indicate your line is it. The question Q. You May proceed started if he would like to repo for your question from the Q.
For participants you think speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from Jeffrey Cohen with Stephens. Please go ahead.
Thanks, guys see hosted 70 events. The pure made this quarter can you maybe talk about where that number is against where you'd like to to ultimately be and then maybe how does that 78 break down between tailored events versus kind of the weekly community events, the run and where would you expect that engaged briefly.
I would say trend long term thanks.
Sure. Thank Jeff this is Jeff.
Joe had again so.
So the 78 events, we had a in Q4.
These were Ah visited a total events to our proprietary events out of that number or a were just over 60, a and with the rest being a third party events that happened that took place in the arena.
I think as we look look forward in the operation of our venues were going to begin to layer on multiple then per day.
And we think that there is a lot of opportunity as we look to do that our current plans call for rolling that out a this summer where we begin to layer and multiple events per day, which will increase the the total number events that we can do from a proprietary standpoint.
Holistically. These are very important for for the company because they're not only serve for our first pillar. Eventually once we have the content play and also the hospital.
These events will be integrated with the online experiences as well and it's a matter of fact, we have started that process of extending some of those game plays are starting this week and make them online as well.
Thanks, guys and then just one quick weaker Tony can you maybe you talk about any cost cutting measures. The as we're looking at just can you kind of preserve cash.
Given the economic outlook or maybe just a timeline of when we can expect.
EBITDA breakeven thanks.
Sure Jeff Let me take first part first obviously with everything going on right now what the product virus, it's a pretty fluid situation. So we are actively looking at a variety of different measures and you'll you'll start to see some coming soon.
And then as far as the cash burn it is concerned as we currently stand right now we have runway to carry us until our debt comes due in August of this year.
Got it thanks, thanks, guys they save out there.
Thank you.
Once again, if we would like to ask a question. Please press star one of your telephone keypad.
Yes.
Our next question comes from Derek Soles Solar Burke with Dougherty and company. Please go.
Hi, guys. Thanks for taking my questions I'm only started off with Frank here I'm wondering if you guys could.
Give give us a little bit more detail on the impact of the krona virus on maybe some foot traffic or utilization at your Las Vegas location and also your affiliate partners.
And also maybe just give us a sense for how the viruses has impacted any of your arena developments with your partners. Thanks.
Yeah, Let me start first but maybe Tony can add some more at the add on that too I.
I would say out of the three Polaris.
The first pillar will have impact.
But I I believe you know we strongly believe that impact will be temporary because for example, like what we're talking out we do have cancellations, but the number of cancellation. So far as very minimum majority of that actually is pushing back the schedule unhappy events later part of this year when things are clearing up.
And like Vegas in other locations, we have it all the affiliate partners, we actually have dedicated.
Purpose built plug and play arena and we do foresee even at the first pillow level when things running good as we move along and we will be quickly recover by having a lot of they pop assures they need to catch up on the elite their schedules and we're the most ready to help them to achieve that purposes. So for the.
Short term, yes, I think we will see some impact on first pillar, but second or third pillar, we actually have high hope that that should be moving into right direction. Because people are staying home getting online watching more content and we're in a process of realigning the company resources for that purpose right now we have something exciting to share with everybody.
Very soon.
And then Derek this is Tony just to add a little bit to what frankly sand so throwing some numbers around it or if you focus on the east port side of it because I think W.P.T. should be relatively.
It affected as as Frank was saying on the on the East Portside. If you look at 2019, we did about seven and a half million of revenues and if you divide that on a weekly basis, you're looking at about 140000 144000 of of revenues per week. So that should give me a rough sense now just to highlight a little bit more on that as you know.
We have a variety of different revenue streams and so some of them will be impacted obviously like food and beverage, but others such as sponsorship should be relatively untouched impacted and then obviously, we also have gaming a ticketing, which as you heard us say earlier, that's actually going to be moved to an online events. So we hope to be able to offset some of the losses there.
To be able to supplement and other areas with online.
Events and with online content.
And then from an EBITDA standpoint, as opposed to revenues it shouldnt have as much impact there as well.
Okay, Great and then the past you guys have kind of spoken to really strong pipeline of interested potential customers rolling out arenas has the virus impacted those talks at all.
Maybe not specifically simon or or Brookfield, those seem to be on track.
But any any additional color on.
Some of the conversations you've had with potential customers and if thats if the viruses.
Maybe pushed out some of those.
Opportunities I guess.
Hey, Derek this is Chad again happy to answer that one for you.
Yeah. The we've been speaking with folks all over the world to about a the their plans to open an operator arenas and how we can support that as part of our affiliate program. Our first a as Frank alluded to earlier, our first step.
Arena and Australia, New Zealand opened up this past Friday in Melbourne. So we're excited that that has opened their doors.
And yeah look the impact of this I think everybody is it's affecting the world everywhere globally and different ways and the responses locally in those markets have been very.
Very different so we're continuing to monitor it but the into interest.
It's still there and I think to what Tony and Frank was saying earlier I think there is it if they are thought to time at the time about pushing it back not necessarily abandoning those plans. So the conversations are still ongoing and and quite active.
Okay, Great and then as a final question I think on the last call you guys kind of pointed to some industry growth rates around 20% and I think you guys alluded to maybe that's a good number to go off of.
Is that still the case or.
So the virus kind of impacted that all.
Yeah. That's that's a interesting question I mean, I think right now it's a little early to tell obviously, we're going to be monitoring the situation very closely and as you said it is a very fluid situation, but as far as in our.
Opinion right now, yes, we believe that that industry growth still as relevant for us yeah, and I would make a guess at the industry numbers will go up this is actually the moments that the industry may pick up some benefit all of this because people are staying home and and we see steam number sees you have been you know breaking records.
Great. Thanks, guys.
Thank you I would like to turn the floor over to management for closing comments.
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Okay, great. So thank you operator, and thank you to those on the phone for your support and participate basin in today's call. We hope you all have a great day.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
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