Allied Gaming & Entertainment Inc (AGAE) 2021 Q4 法說會逐字稿

Greetings and welcome to the Allied Esports Entertainment fourth-quarter and full-year 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to the Allied Esports Entertainment 2021 fourth-quarter and full-year results conference call. Speaking on the call today is Allied Esports Entertainment's Interim Chief Executive Officer, Lyle Berman; and Chief Financial Officer, Roy Anderson; Jud Hannigan, who is leading the e-sports operations; and Yinghua Chen, President and Chief Investment Officer, are also available for the question-and-answer session.

Before I turn the call over to management, please remember that our prepared remarks and responses to questions 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 the 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 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. And with that, it's now my pleasure to turn the call over to Allied Esports Entertainment's Interim CEO, Lyle Berman. Lyle?

Thank you, Lasse, and thank you, everyone, for joining us this afternoon. My remarks today will begin with an update on the previously announced strategic process for our e-sport business, along with the company's progress on our ongoing activities to invest our cash from the sale of the World Poker Tour, or WPT. Roy Anderson, our Chief Financial Officer, will follow with additional details on our fourth-quarter and full-year financial performance. After our prepared remarks, we will open the floor to questions.

As previously reported, we are in the process of exploring strategic options for the e-sport business, and these efforts are ongoing. To this end, we have made substantial progress in identifying a path forward for the e-sport business that maximizes value for the AESC shareholders. And we are in active discussions. We have several interested potential buyers of the e-sport business. While we are not yet in a position to publicly announce further details at this time, we will provide updates as quickly as possible.

As we reported this afternoon in our financial results, we ended 2021 with a cash balance of approximately $98 million, which includes $5 million of restricted cash. We are continuing to identify opportunities to invest this cash, along with the proceeds from any sale of the e-sport business to acquire or merge with an existing business.

As part of this process and as previously announced, the company has engaged a benchmark company to serve as our exclusive adviser in connection with any potential business combination transaction. PetSmart has been a great partner in this process. And over the past several months, we have reviewed the merits of a number of potential targets, investment opportunities.

That said, our due diligence and continued sourcing of other opportunities is ongoing. We continue to work with a sense of urgency in these efforts, and we are very focused on finding the best opportunity available to maximize value for our shareholders.

Importantly, in any transaction that we ultimately decide upon, we do expect AESC shareholders will receive the full value of our cash balance rather than our current market cap. And while I am very limited in terms of what additional disclosures I can currently make, I look forward to providing the market with an update on our progress at the appropriate time.

With that, I'd like to turn the call over to Roy Anderson, our Chief Financial Officer, for an update on our fourth-quarter and full-year financial results. Roy?

Thank you, Lyle. Good afternoon, everyone, and thank you for joining us today. Our fourth-quarter results highlight the strong performance of our e-sports business as we have continued our recovery from the COVID-19 pandemic, with increased demand for our tournaments and production services. Our efforts in maintaining operating efficiencies throughout the lockdown as well as continuously improving our service offerings position the company well for the return of live events.

Now turning to our fourth quarter results from continuing operations. Total revenues for the fourth quarter were $1.9 million, up 107.8% year-over-year, driven by higher revenues in both our in-person and multi-platform content pillars.

Looking at the results in greater detail, in-person revenues for the fourth quarter totaled $1.6 million compared to $700,000 in the prior year period. We delivered strong growth driven by the increased number of events as COVID-19 pandemic related operating restrictions and social distancing measures loosened at our HyperX Arena Las Vegas.

Multi-platform content revenues totaled 400,000 compared to 200,000 in the prior year period. The growth in our multi-platform content pillar was driven by our partnership with the Tencent [Bat] streaming platform, Trovo, and our development and execution of the Trovo Titans program.

Total costs and expenses for the fourth quarter were $5.7 million, a decrease of 64% from $15.8 million in the prior year period. The decline is primarily attributable to asset impairment charges recorded in 2020, including $5 million from the strategic investment agreement, and $5.6 million related to property and equipment in our e-sports business.

Excluding the 2020 impairments and certain one-time transaction charges in 2021, costs and expenses for the fourth quarter were down 5.3%, reflecting our continued prioritization to manage expenses during the quarter and actively reduce nonessential spending. The reduction in costs and expenses were partially offset by higher expenses in our in-person pillar of 84.9% and our multi-platform content pillar of 217.9%, due to the strong recovery of our live events and the continued development of AE studios.

Adjusted EBITDA for the fourth quarter improved to a loss of $2.1 million compared to a loss of $7.8 million in the prior year period. Our net loss for the fourth quarter was $6.3 million compared to a net loss of $18.9 million in the fourth quarter of 2020. The net loss for the fourth quarter of 2020 was negatively impacted by the impairment charges I mentioned previously, as well as a one-time noncash extinguishment loss of $1.7 million, resulting from the acceleration of redemption payments on senior secured convertible debt during the period.

Now moving onto our balance sheet. At December 31, 2021, our cash position totaled $97.9 million, including $5 million of restricted cash. This compared to $5.4 million at December 31, 2020, which also included $5 million of restricted cash. The company's working capital surplus, defined as current assets minus current liabilities, was $89 million at December 31, 2021 compared to $21.3 million at December 31, 2020, which included $36.2 million of net assets from discontinued operations.

In summary, we are proud of the progress we've made throughout the year for our e-sports business. We saw the effects of the COVID-19 pandemic subside and a return to a more normalized operating environment, which led to a strong return to growth in our in-person pillar. We also made significant strides in our multi-platform content pillar by growing our library of e-sports competition, content and securing distribution agreements with several digital streaming platforms.

That concludes our prepared remarks. Operator, please open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. (Operator Instructions) One moment please, while we poll for questions.

Ladies and gentlemen, we have no questions in the queue at this time. This does conclude today's conference. You may disconnect your lines at this time. Thank you all for participation.