Allied Gaming & Entertainment Inc. (AGAE) Q2 2023 Earnings Report, Transcript and Summary

Greetings, and welcome to the Allied Gaming & Entertainment Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tyler Drew, with Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to the Allied Gaming & Entertainment 2023 second quarter earnings conference call. Speaking on the call today are Allied Gaming & Entertainment's Chief Executive Officer, Yinghua 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. 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 statements, 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 and 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. With that, it is now my pleasure to turn the call over to Allied Gaming & Entertainment's CEO, Yinghua Chen. Yinghua?

Thank you, Tyler. Good afternoon, and thank you all for joining us today as we share the latest update on our journey towards becoming a leading and trusted name in the gaming and entertainment industry. Today, we're delighted to present significant milestones that highlight our continued growth and success. First and foremost, on our financial performance side, we are thrilled to announce a substantial increase in our quarterly revenue up to $3.3 million, which is up 182% year-over-year. The increase was driven by the continued success of our original content sponsorship and our new arena and mobile truck sponsorship. These pillars have been instrumental in propelling our revenue growth. Additionally, our diligent efforts in expense reduction have proven to be highly fruitful. Despite the significant revenue growth, we have managed to reduce our G&A by 20%, which contributed to a $1.6 million year-over-year improvement in our adjusted EBITDA. It speaks to our commitment to maintaining fiscal responsibility while achieving remarkable growth. During the quarter, we continued to deliver captivating and engaging experiences to our audience. We produced a total of 99 events comprising 41 proprietary events and 58 third-party events. Notable events include EStars presents Elder Scrolls Online, World Poker Tour event, Ross Video Customer Appreciation, ELEVATED show, Licensing Awards Reception, Golden Knights Watch Party and TL League of Legends Champions of the Rift Community Event. This continued growth further demonstrates the appeal of our unique arena and truck assets and our event production capabilities. In particular, our original content series, ELEVATED, has been a resounding success. ELEVATED Season 2, revolutionized the face of Esports adjacent entertainment, merging the world of gaming, creative arts and reality TV into a potent blend of competitive creativity. The show has reached a total viewership of 12.3 million, with 89.5 million live minutes watched and 11.54 million total unique viewers over the five-week period. We've also continued production of our other original content series, WANNABE Season 2, which will bring even bigger stars and players from the Yankees network. Impressively, this series has a reach of over 9.3 million homes through the YES App and the YES distribution channels. One more exciting development to update is that through our longstanding successful partnership with key players like HP/HyperX, we will be expanding our retail and merchandise offering to our gaming community by connecting our fans with the most advanced gaming peripherals, PCs, equipment, handy gadgets and a variety of gamers' lifestyle merchandise through our uniquely positioned HyperX Arena and Allied's online shop. Also, in line with our strategic plan to broaden our gaming and entertainment coverage, we have taken several steps to pursue aggressively a wide range of strategic opportunities, including the establishment of two new wholly-owned subsidiaries, Allied Mobile Entertainment and Allied Experiential Entertainment that will spearhead this efforts. Allied Mobile Entertainment, AME, is dedicated to exploring opportunities in the massive and growing mobile games market. We're off to a strong start having identified various potential partners, products and services and are currently in the process of testing and prepublic launching a number of casual mobile games, as well as reviewing and pursuing complementary businesses as potential targets for partnerships and acquisition. Allied Experiential Entertainment, AEE, focuses on organizing general entertainment live events, experiential entertainment venue operation, management and consultation. Like AME, AEE has already laid a solid business foundation with promising partnerships. We're currently pursuing potential opportunities with various partners. We will share more about the events and initiatives that we believe will drive further growth and success for AGAE. We expect that Allied Mobile and Allied Experiential Entertainment will enable us to break into new markets, creating additional revenue streams and enhancing our financial performance within the next 12 months. Further updates will be provided when it is appropriate. In conclusion, we're very excited about the remarkable progress we have made and the opportunities that lie ahead. Before turning the call to Roy, I'd also like to note that we continue to believe our stock price is undervalued. Through that end and under our share repurchase plan, we have now repurchased approximately $2.4 million of AGAE stock between the announcement of the plan in November and the end of Q2. With that, I'd like to turn the call now to our CFO, Roy Anderson, to give you updates on our Q2 financials.

Thank you, Yinghua, and good afternoon, everyone. From a P&L perspective, it was a strong second quarter with revenues of $3.3 million, up 182.3% from the prior year period. As Yinghua alluded to, the year-over-year improvement is primarily attributable to the successful release of the second season of our original content series, ELEVATED, which consisted of 10 episodes. The improvement also includes an increase in sponsorship revenues at our world-class Esports Arena in Las Vegas and on our Allied Mobile Esports Truck. Total costs and expenses for the second quarter of 2023 were $4.7 million, a decrease of 2.4% compared to the second quarter of 2022. The improvement is particularly impressive when considering the additional expenses incurred during the quarter related to the production of season 2 of ELEVATED. The additional expenses were more than offset by decreases in other expense categories, including live event production costs, which declined by 31.1%; general and administrative expenses, consisting principally of cash and stock-based compensation, which declined by 19.6%; and depreciation and amortization expense, which declined by 73.7%. Net loss for the second quarter of 2023 improved to $700,000 compared to a net loss of $3.7 million in the prior year period. Our results for Q2 2023 include approximately $715,000 of interest income earned on short-term investments. Our adjusted EBITDA loss was $1.1 million in the second quarter of 2023, improving significantly from a loss of $2.7 million in Q2 2022. The improvement consists principally of the gross margin recognized on our content and event productions and the increase in arena sponsorship revenues, coupled with a reduction in our general and administrative expenses. Our adjusted EBITDA includes adjustments for depreciation, amortization, stock-based compensation and interest income. Now moving on to our balance sheet. As of June 30, 2023, our cash and short-term investments position totaled $82.2 million, including $5 million of restricted cash compared to $86.8 million at December 31, 2022, which also included $5 million of restricted cash. As of June 30, 2023, the company's working capital position was $74.7 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, on December 31, 2022. Also during the quarter and under our stock repurchase program, we acquired 372,436 shares of our common stock in open market transactions at an average selling price of $1.08 for a total repurchase cost of $404,010, excluding broker fees. This brings us to $2.4 million in total 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. In conclusion, it was a positive quarter at Allied, and our business is trending well as we head into the back half of the year. I will now turn the call back over to Yinghua for closing remarks.

Thank you, Roy. It has certainly been a busy 2023 so far at Allied Gaming & Entertainment as we continue implementing our strategic plan. While we still have plenty of work to do to build our full vision for the company, we have seen encouraging progress and believe we're right on the edge of moving up to the next level. Thank you again for joining us today as well as your support. We look forward to speaking with you and providing updates on our business and third quarter results in November.

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.