First Acceptance Q1 2023 Earnings Call Transcript

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May 11, 2023

There are 4 speakers on the call.

Operator

Afternoon, and welcome to the Allied Gaming and Entertainment Inc. 1st Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Tyler Drew, Ado Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to the Allied Gaming and Entertainment 2023 First Quarter Earnings Conference Call. Speaking on the call today are Allied Gaming and Entertainment's Chief Executive Officer, Ying Hua Chen and Chief Financial Officer, Roy Anderson. Before I turn the call over to management, please note that our prepared remarks may contain forward looking statements. Words such as may, will, expect, intend, plan, Believe, seek, could, estimate, judgment, targeting, Should, anticipate, goal and variations of these words and similar expressions are intended to identify forward looking statements.

Speaker 1

Actual results could differ materially from those implied by such forward looking statements due to a variety of factors discussed in the company's public filings, including the risk factors discussed in documents filed with the Securities and Exchange Commission. Although the company believes The expectations reflected in such forward looking statements are based upon reasonable assumptions. It can give no assurance that its expectations will be attained. 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 of the financial information presented in this call represents non GAAP financial measures.

Speaker 1

The company's earnings release, which was issued this afternoon, is available on the company's website, presents definitions of are useful to investors. With that, it is now my pleasure to turn the call over to Allied Gaming and Entertainment's CEO, Jinghua Chen. Jinghua?

Speaker 2

Thank you, Tyler. Good afternoon to you all and thank you for joining us today. I'm very excited to provide updates on Allied's Strong start to the year and our continued momentum into the Q2 and the remainder of 2023. 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 world of gamers with new and unique experiences As the entertainment landscape continue to evolve, 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. We are uniquely positioned to capitalize on this ongoing shift and in turn help brands connect with consumers in most cost effective ways.

Speaker 2

As evidence of this shift, Gallup reports that Fully engaged consumers represent a 23% premium in share of wallet, profitability, Revenue and relationship growth over the average customers. Our live events, both in person and virtual, and the associated brand activations are carefully designed to achieve this engagement and leave lasting impressions for participants who often become our loyal customers. Speaking of events, let's now turn to our in person events during the quarter, Starting with our flagship venue, HyperX Arena, located at Luxury Hotel Las Vegas. Demand remains strong and we produced a total of 82 events comprising 42 proprietary events and 40 third party events, with the latter recording a 5.3% increase compared to the Q1 of 2022. Notable third party events include HyperX CES event, Nighthawk Picture Production, ViewSonic Events, ReliaQuest, LevelUp and Astral Clash, just to name a few.

Speaker 2

Following another successful quarter, we were thrilled to announce the renewal of our exclusive naming rights agreement with HP HyperX, along with the total naming peripherals upgrade. This multiyear agreement will enable us To continue working with HP 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. 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. 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. Excitingly, the top line of HP Omen PCs 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 2

As part of the expansion of the agreement, HP Omen will now also sponsor our Allied Mobile Esports Truck, which includes prominent branding and signage on the Trust as well as HP HyperX Gaming Equipment. The renewal and expansion of this partnership It's 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 experiences and really brings together all of Allied's unique assets and content capability. We will look to generate revenue through multiple channels together with content creators and influencers who will join us in these shows, many of whom we have pre established relationships with. We're in the process of testing to deliver these events and are targeting to bring them to market in the Q3.

Speaker 2

Moving on to our original content program, Season 2 of Elevated, sponsored by Progressive Insurance, debited the first two of its 10 episodes last week. This season, we're joining forces with Won Chu 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 35,000,000 followers across their channels. Season 1 brought in more than 10,000,000 live views and 3,000,000 VOD views over just 4 episodes, And we're excited to see these numbers rise with a full 10 episode slate and our new collaboration with OTK. Our other original series, Wannabe, is available on the Emmy Award Winning YES!

Speaker 2

App, which has a reach of 9,300,000 homes. We also have plans to continue season 2 production, which will include participation from the outstanding winners from our animated 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, We will continue to expand our content offering 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 identify appropriate opportunities in the mobile gaming space. We have seen mobile gaming generate over RMB90 1,000,000,000 in revenue in 2021, which equates to more than 50% of the global gaming and is expected to grow at a CAGR of more than 12% through 2026.

Speaker 2

We're looking to take advantage of the opportunities and expand into this quickly growing market. We look forward to engaging with consumers 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 $2,000,000 of AGAE 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 2

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. With that, I'd like to turn the call now to our CFO, Roy Anderson, to give you updates on our Q1 financials.

Speaker 3

Thank you, Yinghua. Total first quarter revenues of $1,200,000 were essentially flat from the Q4 of 2020 2 and down from $2,400,000 for the Q1 of 2022. The year over year decline is Primarily attributable to the timing of our original content series Elevated. Season 1, which consisted of 4 episodes, was launched and entirely recognized in the Q1 of 2022. Season 2 with 10 episodes will be distributed and recognized in full in the Q2 of 2023.

Speaker 3

This timing issue was partially offset by a 9 0.5% 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. Total costs and expenses for the Q4 of 20 23 were $3,800,000 a decrease of $2,300,000 or 38% compared to the Q1 of 2022. So costs and expenses decreased in large part to the timing and accounting expense recognition evaluated as well as a 26% reduction in our general and administrative expenses, principally cash, severance and stock based compensation. Net loss for the Q1 of 2023 was $1,900,000 compared to a net loss of $3,800,000 in the prior year period. Our results for Q1, 2023 Included approximately $734,000 of interest income earned on short term investments.

Speaker 3

Adjusted EBITDA loss was $2,000,000 for the Q1 of 2023, a 20% reduction as compared with a loss of $2,500,000 in Q1 2022. Our adjusted EBITDA includes adjustments for depreciation, amortization, stock based compensation and interest income. Now moving on to our balance sheet. As of March 31, 2023, our cash and short term investments totaled $84,400,000 including $5,000,000 of restricted cash compared to $86,800,000 at December 31, 2022, which also included $5,000,000 of restricted cash. As of March 31, 2023, the company's working capital position was $75,600,000 including the current portion of an operating lease liability of $1,300,000 that was recorded in connection with the implementation of the new leasing standard ASC 842 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 $1,430,000 excluding broker fees. This brings us to a total of $2,020,000 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. 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. I will now turn the call back over to Yinhua for closing remarks.

Speaker 2

Thank you, Roy. These are exciting times at AGAE as we build out our ecosystem for the gaming community and Our partnership with world class companies who understand the market's potential. It is becoming clear to brands that We are an established name in the gaming community and offer an inroad to this crucial and growing multibillion dollar marketplace. Looking ahead, we will remain focused on expanding our capabilities and providing gamers with engaging touch points across the entire gaming ecosystem. Thank you for joining us today as well as your continued support.

Speaker 2

We look forward to speaking with you again to discuss our 2nd quarter results in August.

Operator

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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First Acceptance Q1 2023
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