Q1 2022 Esports Technologies Inc Earnings Call
Speaker 1: Greetings. Welcome to Esports Technology's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Greetings welcome to esports Technologies' first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker 1: During the course of this call, statements made that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those contemplated in these forward-looking statements.
During the course of this call all statements made that are not statements of historical fact cuts to forward looking statements that are subject to risks uncertainties and other factors that could cause our actual results to differ materially from those contemplated in these forward looking statements forward looking statements therapy.
Speaker 1: Forward-looking statements are based on management's current assumptions, expectations of future events and trends which may affect esports technology's business, strategy, operations, or financial performance.
That management's current assumptions expectations of future events and trends, which may affect the esports technologies business strategy operations or financial performance.
Speaker 1: Existing and perspective investors are questioned not to place undue reliance on these forward-looking statements, which speak only as of today's date. For more information, please refer to
This thing in perspective is that there's a question not to place undue reliance on these forward looking statements, which speak only as of today's date for more information please refer to.
Speaker 1: the risks and uncertainties and other factors discussed in esports technologies.
The risks and uncertainties and other factors discussed in esports technologies.
Speaker 1: SEC filings, particularly its Form 10-K for the year ended September 30, 2021. All cautionary statements that we make during this call are applicable to any forward-looking statements that we make whenever they appear. You should carefully consider the risk uncertainties and other factors discussed in Esports Technologies' SEC filings.
C C filings, particularly its Form 10-K for the year ended September 30th 2020 , one all cautionary statements that we make during this call are applicable to any forward looking statements that we make whenever they appear you should carefully consider the risks uncertainties and other fast.
Or factors discussed in esports technologies S. C. S. E C filings esports technologies undertakes no obligation to update any estimate production projections or forward looking statement.
Speaker 1: eSport technologies undertakes no obligation to update any estimate, projection, or forward-looking statement.
Speaker 1: Please note that this conference is being recorded. I will now turn the conference over to Aaron Speech, founder and CEO . Thank you. You may begin. Good morning.
Please note that this conference is being recorded I will now turn the conference over to Aaron speech founder N. C. E. O. Thank you you may begin.
Good morning, everyone and welcome.
Speaker 2: We are very pleased with what we have accomplished during our first quarter of 2022, as we have taken significant strides in achieving our goal of being the leader in esports wagering and technology.
We are very pleased with what we have accomplished during the first quarter of 2022, because we have taken significant strides in achieving our goal of being a leader in E sports wagering in technology.
Speaker 2: Our vision is to provide unique wagering experiences to the 550 million underserved esports fans from around the world.
Our vision is to provide unique wagering experiences to the 550 million underserved esports fans.
Although valve in the world.
Speaker 2: During Q1 2022, we took significant strides towards our vision.
During Q1, 2022 we took significant strides towards our vision.
Speaker 2: We completed a transformative acquisition of five online casino and sportsbook brands with 1.25 million deposited customers, with a majority of them under the age of 35.
We completed a transformative acquisition of five online casino and sports book brands with $1 million to $5 million deposited customers with a majority of them under the age of 35.
Speaker 2: Of the top 15 wagering markets, Europe has 12. With this acquisition, we now have market access to many of these European markets.
Of the top 15 wagering market Europe has 12.
With this acquisition, we now have market access to many of these European markets.
Speaker 2: access to tier one regulated markets including the United Kingdom, Germany, Ireland, and Denmark.
Access to tier one regulated markets, including the United Kingdom, Germany.
Ireland and Denmark.
Speaker 2: Our future esports products will have audience of over 200 million people in the European market.
Our future esports products will have audience of over 200 million people in the European markets.
Speaker 2: Our acquisition integration is going better than anticipated.
Our acquisition integration is going better than anticipated.
Speaker 2: The performance of the assets are on target and our key acquisition integration goals are going extremely well.
The performance of the assets are on target and our key acquisition integration goals are doing extremely well.
Speaker 2: We have consolidated all of our products onto a single platform.
We have consolidated all of our products onto a single platform.
Speaker 2: This will allow us to be efficient as we launch Gogawi into Asia, Latin America, and CIS.
This will allow us to be efficient as we launch go gallery into Asia Latin America.
And C I S countries.
Speaker 2: Key post acquisition targets, including employee migration, are being hit and or exceeded.
Key post acquisition targets, including employee migration are being hit or.
Or exceed it.
Speaker 2: We are diversifying our revenue by expanding into Latin America and Asia, along with the European business that we just acquired.
We are diversifying our revenue by expanding into Latin America and Asia.
Along with the European business that we just acquired.
Speaker 2: We are on track to launch our esports products in calendar 2020.
We are on track to launch our esports products in calendar 2022.
Speaker 2: Including esports book, which will be a regulated sports betting product with a focus on
Including <unk>.
E Sports book.
Which will be a regulated sports betting product with a focus on esports.
Speaker 2: Throughout Europe and other regulated market that we have access to. And browser beds, which is
Throughout Europe , and other regulated markets that we have access to.
And browser beds, which is our unique browser extension that will allow a consumer to bet directly in the video stream that they are watching.
Speaker 2: that will allow a consumer to bet directly in the video stream that they are watching.
Speaker 2: We're excited that both of those products are on track for Q2 of this calendar year.
That both of those products are on track for Q2 of this calendar year.
Speaker 2: We continue to make progress to patent our technologies and innovation.
We continue to make progress to patent our technologies and innovations.
Speaker 2: We've submitted five patent applications in the US over the last 12 months.
We have submitted five patent applications in the U S over the last 12 months.
Speaker 2: While these are all pending review, it is a key that we obtain patent approval on our technology innovation.
While these are all pending review it is key that we obtain patent approval on our technology innovations.
Speaker 2: We recently just opened our offices in Malta and are happy to say that all of the employees from the acquired brand are successfully moved.
We recently just opened our offices in Malta and are happy to say.
But all of the employees from the acquired brands are successfully moved in.
Speaker 2: We drove $7.1 million in revenue, with most of that coming in December , from the newly acquired
We drove $7 1 million in revenue with most of that coming in December from the newly acquired brands.
Speaker 2: an increased cash position to $11.8 million, up $2.8 million from year ahead.
An increased cash position to $11 8 million up $2 8 million from year end.
Speaker 2: We were very excited to release a 10 month projected earning of 70 million for fiscal year ending September 30th. And with that, I'll hand it over to Jim.
We were very excited to release, a 10 month projected earnings of $17 million for fiscal year ending September 30th.
And with that I'll hand, it over to Jim.
Thank you Erin and good morning, everyone.
Speaker 2: I just want to remind everyone the discussion of our results for Q1 2022 will be relatively brief, as our results only include one month of activity of the recent acquisition, which was only completed at the end of November .
I just want to remind everyone. The discussion of our results for Q1 2022 will be relatively brief as our results only include one month of activity of the recent acquisition.
Which was only completed at the end of November .
Given the transformational aspect of this acquisition.
Speaker 2: comparison to the prior periods are not particularly meaningful given its size and scale. So we'll only be talking about the current quarter's results.
Comparisons to prior periods are not particularly meaningful given the size and scale.
So we'll only be talking about the current quarter's results.
Speaker 3: I feel we now have a business of scale, which should be a platform to leverage our future growth.
I feel we now have a business of scale, which would be a platform to leverage our future growth.
Speaker 3: To reiterate what Aaron said, we are pleased to announce that in our Q1 2022, we generate 7.1 million in revenue and over 2.5 million gross margin for the quarter. Well, substantially all of this revenue...
To reiterate what Aaron said, we are pleased to announce that in our Q1 2022, we generated $7 1 million of revenue and over $2 5 million gross margin for the quarter.
Well essentially all of this revenue was from the recent acquisition.
Speaker 3: we will be continuing to build and develop our esports product and extend the reach.
We will be continuing to build and develop our esports products and extend our reach.
Speaker 3: We're also happy with our post-acquisition results, as we're operating the business to what we expected and within.
We're also happy with our post acquisition results.
We're operating the business to what we expected and within plan.
Speaker 3: This execution gives us confidence that we will achieve our stated goal of 70 million for fiscal 2020.
This execution gives us confidence that we will achieve our stated goal of $70 million for fiscal 2022.
Speaker 3: We get to remind everyone our fiscal year in September 30, 2022.
And again to remind everyone our fiscal year end September 32022.
Speaker 3: So that will include only 10 months of our post acquisition.
So that will include only 10 months of our post acquisition activity.
Speaker 3: Looking at other aspects of our business, we ended the quarter with 11.8 million cash up 2.7 million from the year ended September 30th, 2021.
Okay. The other aspects of our business, we ended the quarter with $11 8 million in cash up $2 7 million from the year ended September 30 of 2021.
Speaker 3: We continue to invest in the growth of our business. Just said EBITDA for the quarter was negative 3.9.
We continue to invest in the growth of our business adjusted EBITDA for the quarter was negative $3 9 million.
Speaker 3: Our adjusted EBITDA is calculated by starting with our loss from operation of $7.8 million and adjusting for acquisition costs of $2.2 million, non-cash stock compensation costs of $1.4 million, and depreciation and amortization of approximately $300,000.
Our adjusted EBITDA is calculated by starting with our loss from operations of $75 million and adjusting for acquisition costs of $2 2 million noncash stock compensation costs of $1 4 million and depreciation and amortization of approximately 300000.
Speaker 3: Our net cash use and operating activities was 3.0 million. We expect to continue to invest in our esports business and products as we expand the geographical reach of our iGaming sports book and esports business throughout fiscal 2022.
Our net cash used in operating activities was three points here and there.
We expect to continue to invest in and our esports business and products as we expand the geographical reach of our I gaming Sports book and he spoke to this throughout fiscal 2022.
Speaker 3: During Q4, we completed the finance of our acquisition, which raised over 67.7 million. This was used to pay the acquisition price of 50 million euro, as well as the acquisition cost. We've taken significant strides in the c emphasized
During Q4, we completed the financing acquisition, which raised over $67 7 million.
This was used to pay the acquisition price of 50 million Euro.
As well as the acquisition costs.
So we've taken significant strides in the current quarter.
And with that I hand, it back over there.
Thank you Jim.
And thank you all for tuning in.
Speaker 2: I'd like to now open it up to the analyst for a Q&A.
I'd like to now open it up to the analysts for Q&A.
Operator.
Speaker 1: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like 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 keys. Our first question is from Chris Pierce with Needham & Company. Please proceed.
Thank you him 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 if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.
Sorry, he is.
Our first question is from Chris peers with Needham and company. Please proceed.
Speaker 3: Hey, Aaron. Good morning. One clarification question. Just in the press release, and you mentioned it, single platform, can you just kind of go a little deeper on what you mean there? Because I know there was a number of brands in the acquisition, I know GoGowie, is kind of the platform you guys had prior. So just kind of, when you say single platform, is that something internally on your end, that's not on the customer-facing side, that's a migration that you did? Can you just kind of clarify that first?
Hey, good morning.
One clarification question just in the press release and you mentioned it a single platform can you just kind of go a little deeper than what you mean, there because I know there was a number of brands and the acquisition and then I'll go Gary.
You guys had prior so just kind of is that when you say single platform. That's something internally on your end that's not on the customer facing side. It's a migration that you did can you just kind of clarify that first.
Speaker 2: Yeah, absolutely. What that means is we actually moved our for original brand go galley from a previous provider on to the Aspire BTO bet brand. So that way that we have all of our brands
Yeah, absolutely what that means is we actually moved our.
For original brand go Gary.
From a previous provider onto the aspire Eto bet brand so that way, we have all of our brands.
Speaker 2: under one platform provider. The reason why we did this is it creates huge operational benefits.
Under one platform provider the reason why we did it.
It creates huge operational benefits.
Speaker 2: to having the same CRM systems under one roof. And it's extremely useful for us on the loyalty side to keep everything synced up through all of the brands that we acquired, plus GoGowie, plus the new brands that we plan on launching in 2020.
To having the same CRM systems under one roof and.
STREAMWAY useful for us on the loyalty.
To keep everything synced up.
All of the brands that we acquired Plaza.
Joe Galli, plus the new brands that we plan on launching in 2022.
Speaker 3: got it. Perfect. And then just kind of thinking about the business you acquired, the trailing 12 month revenue, and then the preannouncement and the kind of the reiteration tonight, it looks like a higher monthly run rate. Can you kind of talk through short term, how you've been able to drive those revenues higher, and then what you're thinking on the medium and longer term as well?
Got it perfect and then just kind of thinking about the business you acquired the trailing 12 month revenue and then the pre announce that kind of a reiteration tonight. It looks like a higher monthly run rate can you kind of talk to short term, how you've been able to drive those revenues higher and then what you're thinking on the medium and longer term as well.
Speaker 2: Yeah, absolutely. So one of the main reasons why Aspire felt that they wanted to sell the brands is because they weren't giving them the attention that they deserve. Now that the brands are in dedicated resources that are putting their full force and attention into those B2C products.
Yeah, absolutely. So one of the main reasons why aspire felt.
Felt that they wanted to sell the brands just because they werent, giving them.
The attention that they deserved now that the brands are in dedicated resources that are putting their full force and attention.
To those b to C products, we're able to optimize a lot of the marketing efforts.
Speaker 2: we're able to optimize a lot of the marketing efforts and tailor a lot of the affiliate deals.
And and tailor a lot of the affiliate deals so that way, we can drive revenue and.
Speaker 2: so that way we can drive revenue. And not to say that Aspire wasn't doing a good job before, the products were growing healthy assets, and that's the reason why we purchased them. But we always felt that we were going to be able to improve upon what Aspire built originally.
And not to say that aspire wasn't doing a good job before the the products, we're growing healthy assets and that's the reason why we purchase them.
But we always felt that we were going to be able to improve upon about aspire built originally.
Speaker 3: got it and then so that's kind of the eye gaming, you know, kind of the legacy piece of it. You can talk about, you know, how you can't help penetrate these customers with these sports.
Got it and then so that's kind of the I gaming kind of the legacy piece of the business can you talk about you know how you can hope to penetrate these customers with esports.
And that's it for me.
Speaker 2: Yes. So, so first for a wagering platform, it's always better to have a younger customer.
Yeah. So.
First for our wagering platform, but it's always better to have a younger customer base. This.
Speaker 2: This is because you have a far longer consumer lifespan and they're far cheaper to acquire.
This is because you have a far longer consumer lifespan, and they're far cheaper to acquire.
Speaker 2: Sports wagering customers are very loyal to their platforms when you treat them well. So once you have a product they love, it's fun on a sports wagering product can be extremely low with a great loyalty program.
Fourth wagering customers are very loyal to their platforms. When you treat them well. So once you have a product they love the parana sports wagering product can be extremely low with a great loyalty program and <unk>.
Speaker 2: And even more important than that, it has been found in a recent study out of the UK that Gen Z and millennials are 4.3 times more likely to wager on esports and 4.5 times more likely to bet on iGoon and casino products.
Even more important than that it has been found in a recent study out of the UK that Gen Z and millennials are four three times more likely to weigh drawing esports is one five times more likely to bet on itunes and Testino products.
Speaker 2: The demand for eSports and an entertainment product and vetting offering is also anticipated to rise as 37% of UK adults said they expect to watch eSports in the future. More than twice the current 15% who do so now.
The demand for E sports and entertainment products and betting offering is also anticipated to rise is 37% of U K adults that they expect to watch E sports in the future.
More than twice the current 15% who do so now.
Speaker 2: This is according to a survey of 20,000 adults across 16 markets in the UK.
This is according to a survey of 20000 adults across 16 markets in the U K.
Speaker 2: Keep in mind, there are already 550 million fans of esports globally, and we are here to build products for that audience by developing odds and modeling that is fair to the consumer, a modern UI UX that gives them the site they are comfortable with.
Keep in mind, there are already 550 million fans of esports globally.
We are here to build products for that audience by developing ards and modeling that is fair to the consumer.
Modern UI UX that gives them a site they are comfortable with it.
Speaker 2: in technologies that allow them to bet where they watch the sport they love.
In technologies that allow them to that where are they watched the sports they love.
Speaker 3: Got it. And then just, I guess, one more clarification if I can slip it in. You talked about calendar 2022, the two new products, the esports book in Europe and the browser beds. Esports book, that's the odds tightening, the technology you've kind of invested in to drive a lower odds for consumers. Am I thinking about that correctly?
Got it and then just I guess, one more clarification, if I can slip it in you talked about calendar 2022, the two new products. The E Sports book in Europe , and the Brown.
You bet esports, but that's the odds tightening the technology kind of investment into.
Drive the lower.
Lower odds for consumers is that and I think about that correctly.
Speaker 2: No, actually, the OZEN modeling product is going to be launched in the first quarter of this year. We hope to have that out very quickly. Esports book is actually a full-scale sports book dedicated to esports consumers, but people that also want to play on traditional sports book as well, focused towards Gen Z and millennials, but we're able to launch that product through regulated markets like the UK and Germany. Where's GoJowie?
No actually the Ogden modeling product is going to be launched in the first quarter of this year.
We hope to have that out very quickly east.
E Sports book is actually a full scale sports book dedicated to E sports consumers, but people that also want to play on traditional sports book as well focus towards Gen Z and millennials, but we're able to launch that product regulated markets like the UK and Germany, whereas go galley.
Speaker 2: is more focused on countries like the Philippines, Brazil, and Thailand.
It's more focused on countries like the Philippines, Brazil and Thailand.
Speaker 3: Perfect. Thanks for clarifying. Appreciate the answer to the questions. Good luck.
Perfect. Thanks for clarifying appreciate you answering the questions. Good luck.
Thank you Chris.
Speaker 1: There are no further questions from analysts. I will now turn the call over to management for closing remarks.
There are no further questions from analysts I will now turn the call ever give the management for closing remarks.
Speaker 2: That's all. Thank you for everybody who could join today. We were really excited to share these results with you and we look forward to talking to you guys next quarter. Thank you everybody.
Yeah.
It's all thank you for everybody who could join today, we were really excited to share. These results with you and we look forward to talking to you guys.
Next quarter I think.
Everybody.
Speaker 1: Thank you, this does conclude today's conference. You may disconnect your lines of this time and thank you for your participation.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Sure.
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