Xponential Fitness Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 19, 2024

There are 4 speakers on the call.

Operator

Good day, everyone, and welcome to the Allied Gaming and Entertainment Inc. 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. Today's call will be recorded and I will be standing by should you need any assistance.

Operator

It is now my pleasure to turn the conference over to Tyler Drew with ADDO Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to the Allied Gaming and Entertainment Second Quarter 2024 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, could, 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. 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, reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non GAAP financial measures are useful to investors.

Speaker 1

And with that, it's now my pleasure to turn the call over to Allied Gaming and Entertainment's CEO, Jinghua Chen. Jinghua?

Speaker 2

Thank you, Tyler, and thank you all for joining us this afternoon. We are thrilled to speak with you today about the upward trajectory of our business as we continue to gain traction advancing our strategic initiatives. Notably, Z Tag is performing well. Our HyperX arena remains in high demand. And just this morning, we announced the creation of the World Mahjong Tour, WMT, Modeled after the highly successful World Poker Tour, WMT will debut later this year, and I will provide more details on that shortly.

Speaker 2

Our world class hyper ex arena continues to be hub of activity, hosting a wide variety of events this quarter, totaling 65 event states, 40 of which were third party events. We collaborated with the World Poker Tour on several of these events, which will be invaluable as we develop the World Mahjong Tour. Among the highlights was the WPT Seminole Hard Rock Poker Showdown final table held at the arena on May 29, where Josh Richards claimed victory at nearly $1,000,000 in prize money. The following day on May 30, we hosted the WPT Choctaw Championship final table where James Mackey secured the title and a seat at the upcoming WPT World Poker Championship. Other notable events this quarter included the Sonic Boom Unofficial Level Up after party, the Mobile Legends Bang Bang 2024 North America Challenger Tournament Spring Grand Finale and the Licensing International Excellence Award.

Speaker 2

We have Rex Arena truly embodies versatility, hosting events that range from world class poker tournaments to prestigious industry award ceremonies besides our esports and gaming events. Now let me turn to this morning's exciting announcement, the launch of the World Mahjong Tour, a groundbreaking series of events that will bring the timeless game of Mahjong to a global stage. Why is this so compelling for us? For starters, Mahjong is a game of skill, strategy and a touch of luck with a history spanning over a century. Its popularity has been resurging in recent years, especially among the younger generation of the population.

Speaker 2

While it has always been a beloved game, it has never been monetized or brought to the market on a global scale until now. Additionally, the WPT model has proven to be sustainable and we have the experience required having owned, operated and recently partnered with the Royal Port Couture. For the inaugural season, we will host a series of regional tournaments and events culminating in the final at HyperX Arena in the spring of 2025. WMT will leverage expertise from all 3 of AJE's subsidiaries as we will introduce our proprietary mobile games, module themed content production and a comprehensive membership service model. This multifaceted approach will drive brand awareness and will provide fans and players with a unique and immersive experience, both online and offline.

Speaker 2

We've been working diligently behind the scenes on this endeavor for the past year and we are very optimistic that WMT will be a game changer for us. While we will utilize resources from across the company, Allied Experiential Entertainment or AEE will be very involved in all aspects of WMT. And we are also excited with AEE's progress in other areas of business as it continues to expand on its opportunities in Asia. Notably, we are in close negotiations to partner with a popular annual music festival in Macau, and we look forward to sharing more details in the future as negotiations are finalized. Moving on to Ally Mobile Entertainment or AME, our strategic investment in ZTech, a prominent developer and operator of casual mobile games is progressing well.

Speaker 2

ZeeTech had a busy quarter, having released a brand new casual mobile game, Balloon Pop Mania, a popular match 3 category in May, its 2nd release of the year. The new casual mobile game is very fun and interactive. So far it has been popular with gamers and the feedback from those who have downloaded it has been very positive. We're also utilizing ZTEK for its game distribution capabilities and are currently assessing which games within our AME catalogs are best suited for marketing and distribution on the platform. ZTEK's momentum is evident with Q2 in game ad revenue rising 53% over Q1.

Speaker 2

The business is well positioned for a robust second half of the twenty twenty four and sustained revenue growth. I will now turn the call over to our CFO, Roy Anderson to provide updates on our Q2 financials.

Speaker 1

Thank you, Yinghua. Good afternoon, everyone, and

Speaker 3

thank you for joining us today. Total revenues for the Q2 of 2024 were $2,600,000 up 11% from the Q1, but down 19% from the Q2 of 2023. The decline in year over year revenue was primarily due to a $2,000,000 decrease in revenues from our branded content production arm offset by a $1,700,000 increase in casual mobile gaming revenues now that ZTECH has been integrated into the business and is performing well. Total costs and expenses for the Q2 were $7,900,000 an increase from $4,700,000 in the prior year period. Unfortunately, approximately $3,000,000 of the increase in expenses was driven by costs related to the counterproductive actions of United Pastures, including litigation filed by them against AGAE and their hostile attempt to take over the company at a meaningfully discounted price.

Speaker 3

Our net loss was $3,900,000 for the Q2 of 2024 compared to a loss of $1,800,000 in the prior quarter and a loss of $700,000 in the Q2 of 2023. Our adjusted EBITDA loss was $1,400,000 compared to a loss of $1,700,000 in the prior quarter and a loss of $1,100,000 in the Q2 of 2023. Our adjusted EBITDA includes adjustments for the depreciation and amortization of fixed and intangible assets, stock based compensation, non recurring legal fees and interest income. Now moving on to our balance sheet. At June 30, 2024, our cash and short term investments position totaled $95,200,000 including $5,000,000 of restricted cash compared to $78,600,000 at December 31, 2023.

Speaker 3

The increase in our cash and short term investments is primarily attributable to the proceeds of low and non interest bearing loans from Morgan Stanley Bank Asia Limited. The company's working capital of surplus defined as current assets minus current liabilities was $61,800,000 at June 30, 2024 compared to $66,400,000 at December 31, 2023.

Speaker 1

I will now turn the call back over to Ying Huang.

Speaker 2

Thank you, Roy. Before closing the call out, I'd like to reiterate my excitement for all the positive momentum we are experiencing at Allied Gaming and Entertainment and say with full confidence that I believe our management team and Board have the right skills and expertise to lead the company forward. Our 3 subsidiaries all have revenue catalyst in the near future. We're especially optimistic about the opportunities presented by the World Margin Tour and our ability to gain strong momentum leading up to the inaugural finale in the spring of 2025. The highly popular and resurgent game of Mahjong offers vast untapped market potential that we're eager to capitalize on.

Speaker 2

Thank you for your time today. We look forward to speaking with you again when we release our Q3 2024 results in November.

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Xponential Fitness Q2 2024
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