Q1 2023 Allied Gaming & Entertainment Inc Earnings Call

Speaker 2: Good afternoon and welcome to the Allied Gaming and Entertainment Inc. First Quarter 2023 Earnings Conference Call.

Speaker 2: All participants will be in listen-only mode.

Speaker 2: Should you need assistance, please go to the conference specialist by pressing the star key followed by zero.

Speaker 2: Please note this event is being recorded.

Speaker 2: I would now like to turn the conference over to Tyler Drew, Ado Investor Relations. Please go ahead.

Speaker 3: Thank you, Operator. Good afternoon and welcome to the Allied Gaming and Entertainment 2023 quarter earnings conference call.

Speaker 3: Speaking on the call today, our Allied Gaming Entertainment's Chief Executive Officer, Ying Wachin, and Chief Financial Officer Roy Anderson.

Speaker 3: believe, seek, could, estimate, judgment, targeting, should, anticipate, goal, and variations of these words and similar expressions are intended to identify forward-looking statements. All results could differ materially from those implied by such...

Speaker 3: The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Speaker 3: In addition, certain of the financial information presented in this call represents non-GAAP financial measures.

Speaker 3: The company's earnings release, which was issued this afternoon, is available on the company's website, presents definitions of such non- GAAP financial measures, reconciliation to the appropriate GAAP measures , and an explanation of why the company believes such non- GAAP financial measures are useful to investors.

Speaker 3: With that, it is now my pleasure to turn the call over to Allied Gaming and Entertainment CEO , Ian Watchenz, Ian Wach.

Speaker 4: Thank you, Taylor. Good afternoon to you all and thank you for joining us today. I'm very excited to provide updates on airline's strong start to the year and our continued momentum into the second quarter and the remainder of 2023.

Speaker 4: As we spoke to you on our last quarterly conference call, Allied is now laser focused on leveraging our renowned assets, products and services to provide the rapidly growing road of gamers with new and unique experiences as the entertainment landscape continue to evolve.

Speaker 4: We recognize it is crucial to provide consumers with captivating and stimulating experiences in various formats to compete with the increasing number of entertainment options available.

Speaker 4: We are uniquely positioned to capitalize on this ongoing shift and in turn help brands connect with consumers in most cost-effective ways.

Speaker 4: As evidence of this shift, GALAB reports that fully engaged consumers represent a 23% premium in share of wallet, profitability, revenue, and relationship growth over the average customers.

Speaker 4: Our live events, both in person and virtual, and the associated brand activation are carefully designed to achieve this engagement and leave lasting impressions for participants who often become our loyal customers.

Speaker 4: Speaking of events, let's now turn to our in-person events during the quarter, starting with our flagship venue, HyperX Arena, located at Luxor Hotel Las Vegas. Demand remains strong and we produced a total of 82 events, comprising 42 proprietary events and 43rd party events, with the letter recording of 5.3% increase. Compared to the first quarter of 2022.

Speaker 4: Notable third-party events include HyperX CES events, Nighthawk picture production, ViewSonic events, ReliQuest, LevelUp, and Astral Clash, just to name a few. Following another successful quarter, we were thrilled to announce the renewal of our exclusive naming rights agreement.

Speaker 4: with HPE HyperX along with the total naming peripherals upgrade.

Speaker 4: This multi-year agreement will enable us to continue working with HPE HyperX, who has been an incredible partner over the years, and also ensures that our flagship arena will remain branded as HyperX Arena Las Vegas.

Speaker 4: HP HyperX will receive prominent branding and signage inside and outside of the venue, as well as across all arena promotion, content and social media platforms.

Speaker 4: In addition, we will continue to partner on a variety of co-branded experiences and events at the arena focused on growing gaming and esports communities.

Speaker 4: Excitingly, the top line of HP Omen PC and monitors will also be used to retrofit and update the gaming zones within the HyperX Arena, which is yet another way we will further enhance gamers and viewers experiences.

Speaker 4: As part of the expansion of the agreement, HP Omen will now also sponsor our Allied Mobile Esports truck.

Speaker 4: which includes prominent branding and signage on the truck as well as HP HyperX gaming equipment.

Speaker 4: The renewal and expansion of this partnership is further proved that brands see the value and the reach of our business model. We are also making progress on producing more of our own live shows from the arena, which focuses on highly engaged live and virtual experts.

Speaker 4: many of whom we have pre-established relationships with.

Speaker 4: We're in the process of testing to deliver these events and are targeting to bring them to market in the third quarter.

Speaker 4: This season we are joining forces with One True King or OTK, the award-winning gaming and entertainment content collective and one of the most watched organizations on Twitch. Each episode of Elevated will be hosted by different OTK members who have a collective reach of more than 35 million followers across their channels. Season 1 brought in more than 10 million live views and 3 million VOD views over just 4 episodes.

Speaker 4: And we're excited to see these numbers rise with a full 10 episodes, slate, and our new collaboration with OTTK.

Speaker 4: Our other original series, one of the, is available on the Emmy Award winning Yes app, which has a reach of 9.3 million homes.

Speaker 4: winners from our elevated show and further build up the value we bring to our partners and viewers by fully utilizing our unique assets and resources to grow content creators and gaming entertainment communities.

Speaker 4: We will continue to expand our content offerings and have a strong pipeline of original content to be released in the near future. We look forward to updating you further on future seasons as they are brought to the market. Last but certainly not least, we are continuing our efforts to expand our content offerings and have a strong pipeline of original content to be released in the near future.

Speaker 4: grow at a kegger of more than 12% through 2026. We're looking to take advantage of the opportunity and expand into this quickly growing market.

Speaker 4: with our new product offerings as soon as they become available. Before I turn the call over to Roy, I'd like to reiterate that we maintain the belief that our stock price is undervalued. To that end, and under our share repurchase plan announced in November , we repurchased approximately $2 million of AGE stock in total up to Q1 2023. In summary, we remain confident in the strategic shift of our business and we're seeing encouraging results from our early work.

Speaker 4: Ally is trusted in the gaming community, and as we continue to build out and expand on our assets and capabilities, we are well positioned to further validate this trust and become the go-to name for gaming consumers as well as the brands that aspire to reach them.

Speaker 4: With that, I'd like to turn the call now to our CFL Roy Anderson to give you updates on our Q1 financials. Thank you, Yingwa. So the first quarter revenues of $1.2 million were essentially flat from the fourth quarter of 2022.

Speaker 3: and down from $2.4 million for the first quarter of 2022.

Speaker 3: The year-over-year decline is primarily attributable to the timing of our original content series Elevated.

Speaker 3: Season 1, which consisted of four episodes, was launched and entirely recognized in the first quarter of 2022.

Speaker 3: Season 2, with 10 episodes, will be distributed and recognized in fall in the second quarter of 2023.

Speaker 3: This timing issue was partially offset by a 9.5% year-over-year increase in revenues from proprietary and third-party events held at the company's HyperX Arena Las Vegas and in our Allied Esports Truck Operations.

Speaker 3: Total cost and expenses for the fourth quarter of 2023 were $3.8 million. A decrease of 2.3 million or 38 percent compared to the first quarter of 2022.

Speaker 3: Cost and expenses decreased in large part to the timing and accounting expense recognition evaluated as well as a 26% reduction in our general administrative expenses, principally cash, severance, and stock-based compensation. That loss for the first quarter of 2000...

Speaker 3: Adjusted it to be the loss was $2 million for the first quarter of 2023, a 20% reduction as compared with the loss of $2.5 million in Q1 2022.

Speaker 3: Our adjusted EBITDA includes adjustments for depreciation, amortization, stock-based compensation, and interest income.

Speaker 3: Now moving on to our balance sheet. As of March 31, 2023, our cash and short-term investments position totaled $84.4 million, including $5 million of restricted cash compared to $86.8 million at December 31, 2022.

Speaker 3: which also included $5 million of restricted cash. As of March 31, 2023, the company's working capital position was $75.6 million, including the current portion of an operating lease liability of $1.3 million that was recorded in connection with the implementation of the new leasing standard, ASC 842.

Speaker 3: on December 31, 2022.

Speaker 3: Also, during the quarter and under our stock repurchase program, we acquired 1,105,604 shares of our common stock in open market transactions at an average selling price of $1.26 for a total repurchase cost of $1.43 million, excluding broker fees.

Speaker 3: This brings us to a total of $2.02 million in repurchases since the commencement of the plan. Moving forward, the manner, timing, and amount of any purchases will continue to be based on an evaluation of market conditions, stock price, and other factors.

Speaker 3: Overall, it was a solid quarter at Allied and we are trending well so far in Q2 as we begin recognizing revenue from season 2 of elevated and continue moving forward on our strategic plan.

Speaker 3: I will now turn the call back over to Yin-Yua for closing remarks.

Speaker 4: Thank you, Roy. These are exciting times at AGAE as we build out our ecosystem for the gaming community and expand our partnership with world-class companies who understand the market's potential.

Speaker 4: It is becoming clear to brands that we are an established name in the gaming community and offer an in-road to this crucial and growing multibillion dollar marketplace.

Speaker 4: Looking ahead, we will remain focused on expanding our capabilities and providing gamers with engaging touchpoints across the entire gaming ecosystem.

Speaker 4: Thank you for joining us today as well as your continued support. We look forward to speaking with you again to discuss our second quarter results in August .

Speaker 2: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker 1: J and.