Q4 2020 Allied Esports Entertainment Inc Earnings Call
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Greetings and welcome to Allied esports Entertainment fourth quarter, and full year 2020 earnings Conference call. At this time, all participants are in a listen only mode.
Mode, a question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Note. This conference is being recorded I will now turn the conference over to your host lots of Gladson managing director of Investor Relations. Thank you you may begin.
Thank you operator, good afternoon, and welcome to the Allied esports entertainment, 2024th quarter and full year results conference call.
Speaking on the call today is allied esports entertainments, Chief Executive Officer, Frank <unk>, and Chief Financial Officer, Tony Hunt.
The company's president and longtime World Poker tour of CEO.
Again, not on placebo and drug on hand, again, who was leading the allied esports operations. We're also available for the question and 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.
And the plan believe seek could estimate judgment targeting.
Good.
Anticipate goal.
And variations of these words on similar expressions are intended to identify forward looking statements.
Actual results could differ materially from those implied by the way.
It's esports arena at significantly reduced operating hours and implementing the extensive standardization protocols regularly through all of the venue.
Furthermore.
Enforced physical distancing remained in effect throughout the quarter.
Lowering taunt him on capacity by approximately 30.
And all the pre pandemic level with food and beverage service also limited.
Overall, we believe we have earned the trust of our customers to provide a safe place to play with our enhanced safety and sanitation protocols.
Beginning March 15, the state of Nevada announced.
The menu of customer capacity will increase to 50% and we have already begun to see increases in our food and beverage revenues.
We look forward to gradually expanding baby play in tournaments as restrictions from the pandemic loosen and activity in Las Vegas continues to normalize.
During the fourth quarter all of our esports produced 40 event with 41 for parts of events and seven third party production across our North American and European business unit.
The fourth quarter saw short on demand for all of our esports proprietary events with 2576 players.
Competing in online and offline events, including the trove of holiday Royale co organized by Tencent back streaming platform of trouble and Allied esports.
The 90 day Battle Royale Festival was produced from our studios at Hyperx Esports Arena and saw over 1000 players.
North America, and Latin America compete across three game titles.
The event for live streamed exclusively on <unk> Dot live.
We were very pleased to partner on esports organization and the production experience with <unk> growing platform.
We look forward to exploring them all.
The two entities to work together in the coming year.
Despite limited in person the activities due to COVID-19 restrictions, we did execute one of them with the Allied esports truck in North America with our partners at Volkswagen.
Volkswagen.
In addition, our infrastructure and production teams.
For leveraged by third parties for both online productions as well as in of course of the COVID-19 safe bubble for participating participating teams and in the event with no onsite audience.
Third party clients during the fourth quarter include face.
Faces hybrid and the <unk> among others.
Subsequent to quarter end, we were very pleased to announce the renewal of our naming rights partnership with hyper rates for our global flagship property at the Luxor in Las Vegas.
As part of the renewal of agreement <unk> will continue to receive prominent branding and signage inside and outside of the venue.
As well as across all of arena of promotion content and social media platform.
<unk> and all of our esports will continue to partner on a on a variety of co branded experiences and the events at the arena focused on growing their gaming in the esports communities.
<unk> has been an incredible naming rights partner over the past three years, bringing authenticity and credibility for the most recognized esports venue and production facility in the world.
I am thrilled to extend our partnership with <unk> as we work together to continue delivering exciting experiences.
And content for customers and partners.
Given the ongoing restrictions of in person events during the quarter. We continued to focus efforts to expedite the monetization of the multi platform content and interactive services policy of our esports business model, particularly.
Typically multi platform content.
In November we launched a 24 hour cross channel content serology on Twitch and we are now we are on how best programming for a growing library of over 500 hours of content every day across all towards channels.
Programming includes.
<unk> original productions of high profile events, featuring gaming superstars, such as in the kidney place Smith and <unk>.
And in addition to Cleveland Browns quarterback the acre May feel and New York match the picture drove of Mei.
We are also offering top tier professional tournament, including the allied.
Allied esports Odyssey relevant inflection of addiction and serious tournament the via the <unk> go legend series as well as additional legend series of events.
And finally, we are airing weekly land and online events.
Showcasing rising stars from Allied esports gaming community.
<unk> views of all of our esports Twitch channels.
Total to $97 million in the fourth quarter of.
6000, 6202% year over year.
Growth in viewership also led to increased follower growth on switch by 7% in the fourth quarter.
This increase in light of views and bold and confident in our 24 hour content strategy on Twitch.
With viewership across streaming platform continuing to increase we have the ability to tap into our extensive library and deliver on a variety of exciting programming to both stalwarts.
The new pandemic era audiences.
On clamoring for a gaming content.
Our expectation is that global distribution of COVID-19 vaccine will bring the return of the normalized world.
And with this the resurgence of in person events.
We are optimistic.
Optimistic that we will soon be operating in an environment, where the company's foundational strides made on the multi platform content pool of our business in 2020 will come together alongside the resurgence of live events and the return of maximum capacity at our various.
Properties.
Next.
I would like to provide an update on our strategic relationship with Simon property group and Brookfield property partners.
With whom we are partnering to deliver esports experiences at select shopping mall venues.
While we remain on the whole with all of the U S Mall strategy as we.
We continue to have dialogue with our partners regarding the pandemic. We recently held a three day on onshore esports events at Brookfield first call on the mall in Sugarland taxes for March 26 to 28.
The outdoor tournament and broadcast took place using the Allied esports truck, which was the trucks first events outside.
Outside of Nevada, and California, since the onset of the pandemic.
In addition, I'm also pleased to report that the fortress esports for affiliate program partner of the Allied esports property of network, covering Australia, and New Zealand of virtually reopened at store.
During the fourth quarter at.
And Australia's largest shopping mall emporium in Melbourne, Australia.
As you May recall fortress closed shortly after its grand opening in mid March 2020, due to the pandemic.
And the only 30000 square feet. The facility is the largest video gaming and esports entertainment venue of NFL Southern Hemisphere.
Before turning it over to Tony to discuss our fourth quarter and full year financials in more detail I would like to provide an update on the transaction. We are pursuing to sell all world Poker tour business. The element partners LLC on January 19 2021.
All of our esports announced an agreement to sell.
All of the World poker towards the element of partners with the total transaction value of approximately $78 5 million with $68 5 million payable upfront and $10 million paid over up to three years based on a fully guaranteed revenue share of 5% of WPZ branded tournament entry fees.
The on elements owned or licensed gaming platforms.
On March 3rd 2021 on.
All of our esports received an unsolicited proposal for <unk> Corporation to acquire the entire company for $100 million. This.
This proposal was subsequently changed by bodies such debt on March.
<unk> <unk> 2021 volume adjusted its offer to $90 million for only the World Poker tour.
On March 19, 2021, all of our esports announced that element has offered $90 5 million for the World Poker tour.
On March 24th 2021 Allied esports.
Force announced that Bob <unk> has offer of 100 million than the $105 million for the World Poker tour.
On March 32021, all of our in force announced that element has offer $105 million for World Poker tour, which all of our esports ex has accepted and the party amended.
I think purchase agreement.
The company's board of directors will evaluate any additional proposal in due course and compliance with the terms of their stock purchase agreement with element partners.
At this time, we believe subject to customary closing conditions that we will close the transaction.
The second quarter of 2021.
With that I would like to turn the call over to Tony Hull, Our CFO for an update on our fourth quarter and full year financial results Tony.
Thank you Frank and good afternoon, everyone and thank you for joining us today.
Our fourth quarter performance demonstrates.
And the effect our ability to rapidly pivot our strategic focus within our business model amidst the dynamic and challenging operating environment.
While our in person pillar continues to be impacted by the travel restrictions and health and safety protocols. As a result of the pandemic. We continue to make progress on the development of our multi platform.
Construction of rich.
The reduced our operating expenses as well as strengthened our liquidity position and improved capital structure.
As Frank highlighted the World Poker tour segment of our business is being treated as discontinued operations for accounting and disclosure purposes.
Therefore, our results presented today relates to the continuing.
The operations of Allied esports, and our parent company of U S E and exclude the World Poker tour.
Now turning to our fourth quarter results from continuing operations total revenues for the fourth quarter were zero point of $9 million down 52% year over year, primarily due to lower in person revenue.
I'm conscious were partially offset by higher revenues from our multiplatform content pillar.
Looking at these results in greater detail in person revenues for the fourth quarter totaled <unk> 7 million compared to $1 9 million in the prior year period.
The decrease of 62, 5% year over year was the result of the continuation.
Where does this current events reduced operating hours and social distancing measures as a result of the pandemic.
Multiplatform content revenue totaled <unk> 2 million compared to 50000 in the prior year period the.
The growth in our multi platform content pillar was driven by our accelerated focus on this part of the.
Ration of to mitigate the effect of the pandemic and included the licensing of video and data rights related to E sports betting and our partnership with <unk>.
Finally, all interactive services revenues.
Have historically been derived from W. P T alley.
Allied esports has not generated revenues in the pillar yet and as.
As such they are not a part of our results today.
Total costs and expenses for the fourth quarter were $16 6 million up 135% from $7 1 million in the prior year period. The increase is primarily due to an impairment of investments of 5 million along with an impairment of $5 6 million.
And related to fix the esports asset.
Excluding the impairment costs and expenses for the fourth quarter were down 11, 2%, reflecting our continued prioritization to manage expenses during the quarter and actively reduced all nonessential spending with.
We significantly reduced expenses in our in person pillar by six.
Percent online expenses by 38% and selling and marketing expenses by 82%.
Compared to the prior year period.
The reduction in costs and expenses were partially offset by higher G&A and stock based compensation expenses of 19.8, and 79, 3% respectively.
Adjusted EBITDA for the fourth quarter improved to a loss of $3 5 million compared to a loss of $3 7 million in the prior year period.
Total net loss for the fourth quarter was $19 7 million compared to a net loss of $5 8 million in the fourth quarter of 'twenty point of 2019.
Total net loss for.
65% of 2020 was negatively impacted by the impairment charges I mentioned previously as well as the noncash extinguishment loss on acceleration of debt redemption of $1 7 million that was not incurred in the prior year period.
This resulted from the acceleration of monthly payments on the suite of senior secured convertible debt during the period.
Interest expense also increased $1 8 million compared to the prior year period.
Before I turn to a discussion of our balance sheet I'd like to briefly touch on the World Poker tour's results, which are being presented as discontinued operations.
PT revenue for the fourth quarter of 2020 was $5 9 million up 30.
For the for 7% compared to the prior year period.
W. P T as net income for the fourth quarter. It was 0.9 million versus the net loss for zero point $1 million compared to the prior year period.
While the restrictions on hosting events since the start of the pandemic have been stricter in the United States than certain places around the world during the fourth quarter.
<unk> W. P. T was able to hold both live and online events in other countries, including W. P. T online India on out of 52, the inaugural India ring fence series of events in November and.
In the span of 18 days of 150 for events were hosted tried to over 60000 total entries and of total price pool.
<unk> of in excess of $2 million.
The events also returned to the W. P T deep stacks calendar and Yohanan for South Africa, and the first ever W. P T deep stacks in Taiwan.
Within the multi platform content pillar. This has been one of the fastest growing areas for W. P T and not only provides high margin.
<unk> reservation for the business, but also creates strategic touch points and promotional advertising for both linear and OTT platforms.
Allied esports is also utilize the strategic blueprint with OTT platforms by creating our 24 hour cross channel content strategy.
Finally within interactive.
Good mine of W. P. T successfully completed the largest online cash tournament in the club's history with the $100000 Club W. P. T Diamond Championship, which further supports the value of the diamond membership level and will continue to be a growth area in the online business.
Now moving to our balance sheet.
At December.
Surface view on 2020, our cash position totaled $9 1 million, including $5 million of restricted cash and an additional $3 6 million of cash held in connection with the W. P. T business that is included in current assets of discontinued operations and which continues to fund the allied esports business until the close of the transaction.
Temperature compared to $12 1 million at December 31, 2019, which included $3 7 million of restricted cash and $5 1 million held at W. P T.
As of December 31, 2020, we had convertible debt and bridge loans totaling $3 4 million and gross principal which matures on February 23 2020.
So do we.
We also had convertible debt in the gross principal amount of zero point $6 million, which is payable in monthly installments through June 2022, and can also be accelerated at the option of the lender.
In total we reduced the outstanding principal of our convertible debt balance by $5 1 million from the prior quarter.
And subsequent to quarter end, we paid off the remaining 0.6 million of convertible debt that was subject to monthly installments.
In summary, we are proud of the progress we've made throughout the year with the successful pivot towards our multiplatform content pillar, while strengthening our liquidity position and capital structure.
Furthermore.
More difficult cash infusion, we expect to receive from the sale of W. P. T puts us in a strong position to continue to strategically grow our esports business.
In the near term, we remain focused on maintaining safety for employees and customers as the pandemic subsides and restrictions loosen while continuing to execute.
Our strategy and position ourselves for long term growth.
With that we will now open the line for Q&A operator.
Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two.
Against the needs to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star of he's we will pause for a brief moment to poll for questions.
There are no questions at this time I would like to turn the conference back over to management for closing remarks.
Okay. Thank you for your support everyone and for joining us on today's call. We look forward to speaking with you again, when we reported our 2021 first quarter in May.
You again for your time and attention this afternoon and.
And please stay safe and healthy.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.