Allied Gaming & Entertainment Inc (AGAE) 2020 Q2 法說會逐字稿

Greetings, and welcome to the Allied Esports Entertainment Second Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lasse Glassen, Managing Director with ADDO Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, and welcome to Allied Esports Entertainment's 2020 second quarter results conference call. Speaking on the call today is Allied Esports Entertainment's Chief Executive Officer, Frank Ng; and Chief Financial Officer, Tony Hung. The company's President and longtime WPT CEO, Adam Pliska; and Jud Hannigan, who is leading the Esports operations, 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 its expectations will be attained. Company undertakes no obligation to update for any forward-looking statement, whether as a result of new information, future events or otherwise.

In addition, certain of the financial information presented on this call is non-GAAP financial measures. The company's earnings release, which was issued this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measure, and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

With that, it's now my pleasure to turn the call over to Allied Esports Entertainment's CEO, Frank Ng. Frank?

Thank you, Lasse, and thank you, everyone, for joining us this afternoon. Throughout the second quarter, we continue to operate in an extremely challenging and uncertain operating environment arising from the ongoing COVID-19 pandemic. The shelter-in-place orders that began in mid-March across most of the United States, as well as nearly all of our markets around the globe, extended for essentially the entire second quarter. This resulted in the temporary shutdown of the In-person pillar of our business strategy, which negatively affected our second quarter financial performance. Given this reality, we quickly shifted our strategic focus to the Multiplatform Content and interactive pillars to mitigate the impact of the pandemic of our business and to continue to serve our loyal communities while strengthening Allied Esports for the future. Overall, I'm pleased with our employees' steadfast dedication and commitment, as well as the team's ability to rapidly pivot and manage through this pandemic. We believe the strategic shift was successful for both our Esports and poker businesses.

Looking first at Esports. Beginning March 14, we moved all of our U.S. tournament operations and production services online. As one of the few forums of competitive sports entertainment that continues to operate and produce competitive content during the pandemic, we believe the Esports industry has filled the void left by the unprecedented suspension of traditional sports. This led to a tremendous surge in both active gameplay and viewership, with Nielsen recently reporting that 82% of global consumers played video games and watched video game content during the height of the pandemic lockdowns.

Most notably, since the onset of the pandemic, traditional media broadcasters and sports betting platforms have turned to esports during this time to fill the channels and platforms with competitive content, which has accelerated this awareness and acceptance of esports among mainstream audiences and the interest level for traditional brands engaged in esports. As an example of this, Allied Esports Saturday Night beat Wii Mario Kart's tournament at HyperX Esports Arena, recently had a clip that was picked up by and shared by ESPN Esports on Twitter and garnered nearly 0.5 million views on the platform in one day. The clip is currently the fourth most-watched Mario Kart clip of all-time on Twitch and Rising. Over the longer term, we believe that the pandemic will accelerate the growth trajectory of the esports industry and our business.

With the cancellations of In-person World Poker Tour events around the globe due to the pandemic, we also moved our WPT events online and continued to leverage our Interactive Pillar, including the subscription-based online platform, ClubWPT. Recent business highlights from the online shift include a significant increase in new subscribers on our ClubWPT platform, which I will discuss later in my remarks. Based on the success of our online production services and tournaments for Esports and WPT, we expect to continue these activities going forward.

With that as a backdrop, let's shift gears and review our second quarter results. Total revenues for the quarter of $4.6 million declined from $7.3 million in the prior year period. While we generated solid growth in revenues from interactive services, this was more than offset by reduced levels of revenue from In-person experiences and Multiplatform Content related to the pandemic that persist for the entire second quarter. Due to the reduced level of business activity that resulted from the shuttering of the In-person experiences pillar, we took significant actions to reduce our expenses and minimize the negative impact on our financial position. These actions include salary reductions across the board as well as other cost-saving measures. In total, we successfully reduced our general and administrative and selling and marketing expenses by $1.3 million this quarter versus the same period last year. Importantly, we also successfully refinanced the company's outstanding short-term debt, which significantly improved the liquidity position and financial flexibility going forward. Tony Hung, our CFO, will discuss this in more detail in his remarks.

While it is clear that the pandemic adversely impacted our second quarter financial results, we remain confident in our ability to capitalize on the valuable positions we created in esports, which has gained in popularity as a result of the shelter-in-place orders. Additionally, WPT continues to steadily build its business and has a very promising outlook. As we have explained previously, our goal is to maximize the potential of these complementary businesses through a model built around 3 strategic pillars, namely: In-person experiences, Multiplatform Content and Interactive Services.

With that, let's turn to the highlights of our second quarter results, as well as an update on the previously announced strategic partnerships. Like everyone in the live entertainment and event industry, and as noted earlier, we temporarily suspended our In-person first pillar activities during the second quarter. As a result of the hard work and dedication of our team, we placed a heightened focus on Interactive Services and Multiplatform Content to help carry us through these unprecedented times, and simultaneously to strengthen the pipeline of new fans to funnel to our live events as circumstances begin to normalize. In particular, the shift to holding events online led to a significant boost to our Interactive Services pillar.

Looking first at the Interactive Pillar. In total, allied Esports produced 78 online events in the second quarter, with 60 proprietary online events and 18 third-party productions across our North American and European business units. We believe our emphasis on this pillar helped grow our customer base at a time when the In-person pillar of our model was not available. We have also launched a new form of monetization for our events through sports betting and recently announced the VIE.gg CS:GO Legend Series, which is a 2-week program designed to provide sports betting operators with a robust pipeline of authentic competitive daily content. The program will kick off in late August in partnership with Esports Entertainment Group and their sports betting platform, VIE.gg. The Legend Series is one of our longest-running and most successful original tournament brand, and we are thrilled to work with Esports Entertainment Group and their VIE.gg platform to add a wagering component to our content model that will simultaneously introduce Allied Esports to new consumers and elevate the brand even further.

While the Interactive Services platform for the esports business continues to mature, the platform we have built to host online esport tournament represents an important fundamental building block. Longer-term, we envision further developing the platform as an always-on subscription-based online service, where esports players and fans can watch, play and win with other members of the esports community and with top esports personalities and influencers. This online platform will be closely integrated with our offline experiences to create a comprehensive and authentic esports tournament experiences for fans.

Turning to WPT. We also shifted events that were previously held in person to the online environment. In May, WPT hosted its first main tour events online on partypoker. This event set the record for the largest WPT main event in 18 seasons, with 2,130 entries. The WPT Online Series festival also featured the largest WPTDeepStacks event ever, with 3,554 entries and the second-most-attended WPT500 event, with 4,828 entries. The overall WPT Online festival attracted more than 111,000 entries on partypoker. In June, the first-ever WPT Online Poker Open on the partypoker U.S. network became the first WPT real money online gaming event to take place in the United States since the Unlawful Internet Gambling Enforcement Act was adopted in 2006. The event set the record for the largest prize pool in partypoker U.S. network history.

In addition to the online event, the successful World Poker Tour Interactive Services strategy includes ClubWPT, its online membership platform that offers a subscription-based poker club with no purchase necessary. During the second quarter, ClubWPT launched its $100,000 ClubWPT Diamond Championship, which has proven to be a very popular among the players. These qualifiers, which run from June through October, will result in a $100,000 prize pool event in November, which will constitute the largest single day tournament prize pool in club history with the first place taking home $25,000.

On June 1, we also launched the new premium level of ClubWPT membership, ClubWPT Diamond. Early adoption of the new subscription level exceeded our expectation. Thanks in part to these activities, ClubWPT registration accelerated during the second quarter and increased an impressive 127% from the prior year period. This is on top of the 40% year-over-year increase in registrants we generated in the first quarter. Importantly, second quarter ClubWPT subscription revenue increased 50% over the same period last year.

The next pillar of our business model is Multiplatform Content, where we generate content for consumption on a 24 by 7 basis. This could be from content that is livestreamed, postproduced or packaged where we retain optionality in monetizations of content, be it direct distribution and sponsorship, use of third-party distributors or other various hybrid solutions. World Poker Tour has a long track record of success and has effectively executed this business model for many years.

Overall, demand for alternative sports during the crisis continues to increase interest for our poker television product. Second quarter highlights include the distribution of WPT Season 12 and 13 in 77% of the syndication marketplace for linear TV in the U.S. In addition, this should put WPT in the position of selling national ad buys in 2021, potentially increasing future ad sales revenues. This allows us the opportunity to assess markets that we would otherwise not have reached previously. In fact, linear household penetration in the second quarter was up 105% year-over-year, while linear viewership also grew 43% over the prior year period. In addition, WPT partnered with Budweiser and World Central Kitchen to produce the King's Celebrity Poker Challenge on ClubWPT, featuring guest celebrities, including José Andrés, Jason Alexander and Jon Hamm among others. This event aired on FS1 and OTT platforms to an audience of more than 1 million nationwide viewers. And finally, with many live events canceled, ClubWPT provided an opportunity for WPT to pivot online by leveraging the company's assets including live Twitch streams of WPT talent play on ClubWPT in a regular series of online tournament, which has promoted the ClubWPT product in front of thousands of weekly viewers.

On the esports side of the business, the move from the In-person pillar I discussed earlier in my remarks continues to generate significant content that we are streaming. During the second quarter, we launched multiple programming offerings, including proprietary and with partners, including the production of HyperX Game Spotlight, a deep-dive episodic program focused on game developers telling the stories behind the inspiration and evolutions of their games, and Esportstudio, which brings traditional sports athlete together to compete in the video game versions of their sport. In addition to live streaming on Twitch, Esportstudio also aired live on Germany's sportdeutschland.tv OTT platform. We also launched the 12th edition of our proprietary Legend Series program featuring VALORANT by Riot Games, the biggest esports launch of the year. Importantly, the focus on content and online tournament participation dramatically increased social media interaction across Allied Esports' Twitter, Instagram and Facebook accounts, versus the same time period immediately before the closure of the HyperX Esports Arena.

Now I would like to provide an update on our strategic relationship with Simon Property and Brookfield Property Partners. We are working with these important partners to deliver esports experiences through integrated gaming venues and production facilities at select Simon and Brookfield Properties. Earlier in this year, Simon's Mall of Georgia, located in the Atlanta metro area, was selected as the location for an Allied Esports venue. While the Simon project is currently halted due to the pandemic, Simon remains keen on the esports concept, and we have extended the milestone under our partnership agreement until the COVID-19 crisis has ended. We also announced a similar strategic relationship with Brookfield. We plan to expand the on-mall venue concept to an existing Brookfield retail location in the Northwestern part of the United States, with opening currently slated for mid-2021. Although the pandemic has delayed our time line with expansion to malls, we remain confident in the prospects of this business initiative, and we'll continue to update you on our progress in future calls.

Before turning it over to Tony, I would also like to provide an update on our flagship HyperX Esports Arena Las Vegas at the Luxor Hotel & Casino. While we continue to make progress on the further development of our interactive pillar, we remain committed to the live In-person segment of our business. And with our recovery already begun, we believe there is an exciting opportunity for long-term growth in the live In-person esports business. The facility successfully reopened on June 25 with certain restrictions and a modified schedule for daily play and weekly tournament. We are motivated by the early demand we have seen for our weekly tournaments and continue to expand both our live weekly in-person and online tournament offerings. As the health and safety of guests and team members remain our top priority, HyperX Esports Arena has implemented extensive sanitization protocols throughout the venue. Furthermore, reduced operating hours and enforced physical distancing remain in effect, lowering customer capacity by approximately 35% of prepandemic levels. Food and beverage service is also limited. That said, we are seeing encouraging demand for our in-arena events thus far, and have earned the trust of our customers to provide a safe place to play, with our enhanced safety and sanitization protocols.

Looking forward, we continue to focus on online events and production services as the recovery of live in-person events carries on. With that, I would like to turn the call over to Tony Hung, our CFO, for a more detailed update and on our second quarter financials results. Hey, Tony.

Thank you, Frank. Good afternoon, everyone, and thank you for joining us today. As Frank mentioned, the second quarter marked a challenging operating environment, as most of our markets were shut down throughout the quarter due to the COVID-19 pandemic. While our In-person pillar was significantly impacted by the shelter-in-place orders, we quickly shifted our strategic focus to the development of our Multiplatform Content and Interactive pillars. As we continue to lean into these 2 pillars while diligently working on the recovery of live in-person events and adhering to state and local restrictions, our priority remains to manage our expense base and to strengthen our liquidity and capital structure during these uncertain times.

Now turning to our second quarter results. Total revenues for the second quarter of 2020 were $4.6 million, down 37.6% year-over-year primarily due to lower In-person and Multiplatform Content revenues, partially offset by higher revenues from the interactive pillar. Looking at these results in greater detail. In-person revenues for the second quarter totaled $0.7 million compared to $3.2 million in the prior year period, a decrease of 78% year-over-year as a result of the closure of most markets throughout the quarter due to the spread of the pandemic.

Multiplatform Content revenues totaled $0.7 million compared to $1.7 million in the prior year period, a decrease of 59%. While we have seen more demand for our content, we experienced a decrease in Multiplatform Content revenues primarily due to a true-up on music royalties in previous quarters. In addition, we generated lower sponsorship revenue in the second quarter of 2020, resulting from the postponement of the WPT Final Tables due to the pandemic.

Finally, interactive revenues totaled $3.2 million compared to $2.4 million in the prior year period, an increase of 34% primarily attributed to strong growth in ClubWPT registration and the successful launch of our premium ClubWPT Diamond service.

Overall, total revenues in the second quarter of 2020 derived from Allied Esports decreased to $0.6 million from $20.3 million in the second quarter of 2019. Total revenues derived from WPT decreased to $4 million from $5.1 million in the prior year period. Although the mandatory shutdown and shelter-in-place orders across the globe significantly impacted our Esports business, World Poker Tour's mature multi-platform and interactive pillars allowed us to still realize revenue from the transition to online services and events, and generate year-over-year growth in the interactive pillar despite the pandemic.

Total cost and expenses for the second quarter were $9.4 million, down from $10.1 million in the prior year period. We significantly reduced our expenses in the In-person pillar by 41% or $0.3 million, Multiplatform Content pillar by 53% or $1 million, and selling and marketing expenses by 72% or $0.7 million compared to the prior year period, as well as general and administrative expenses by 14% or $0.6 million. The decreases reflect the swift and aggressive actions we took during the quarter to actively reduce all nonessential spending. The year-over-year decrease in total costs and expenses were partially offset by several factors. First, expenses in the interactive pillar increased 44% or $0.2 million compared to the second quarter of 2019, and online operating expenses increased 124% or $0.2 million as we continue to rationalize expenses to build out online events and production services as the recovery of live in-person events continues. In addition, we incurred approximately $0.3 million of stock-based compensation expenses and a $1.1 million impairment charge against our investment in ESA versus none in the prior year period. Total net loss for the second quarter was $10.9 million, up from a net loss of $2.8 million in the second quarter of 2019. The decline was primarily due to the operational results, in addition to a conversion inducement expense of $5.2 million from the refinancing agreement, which I will describe in more detail in a moment.

Now moving to our balance sheet. At June 30, 2020, our cash position totaled $14.2 million, including $5 million of restricted cash compared to $12.1 million at December 31, 2019, which included $3.7 million of restricted cash. The increase of cash is due in large part to a $2 million of additional capital raised from our Chairman, Lyle Berman, through the sale of Allied Esports common stock and from $1.6 million of PPP loans as well as proceeds from the sale of certain WPT employee shares for tax withholding purposes.

During the second quarter, we executed a series of activities to refinance our convertible debt and better position our company going forward. As part of this, we entered into an agreement with Knighted Pastures LLC, who held a $5 million convertible promissory note issued by the company. On April 29, Knighted agreed to convert $2 million of the principal amount of their notes into shares of the company's common stock at $1.60 per share. On May 22, 2020, they also agreed to convert the remaining $3 million of their bridge note into the company's common stock at $1.40 per share. As part of this transaction, Knighted Pastures has also agreed to an 18-month extension on $1.4 million of accrued interest originally due in August 2020. 2 additional existing convertible bridge noteholders, collectively holding $2 million of the company's debt, also agreed to an 18-month extension on the maturity of their respective holdings.

And finally, a group of new institutional investors agreed to refinance, net of fees and interest, the remaining $7 million in convertible bridge note principal and the associated accrued interest held by the company, into senior secured notes maturing in 24 months. With the completion of these transactions, Allied Esports Entertainment has significantly improved its liquidity position and has now addressed the entire $14 million of outstanding debt and $3.7 million of accrued interest that was scheduled to mature on August 23, 2020. This refinancing will provide the company with additional financial flexibility over the next 18 to 24 months as we continue to look for opportunities to optimize our capital in a manner that allows us to better navigate economic uncertainties during the COVID-19 pandemic while creating value and growth for the future.

Finally, as detailed in an 8-K filed on July 24, we entered into an amendment to our existing term sheet and share purchase agreement with TV Azteca, which eliminated our future $2 million commitment for various strategic initiatives and our obligation to further invest in and develop an esports platform for the Mexican market, in turn allowing us to conserve more cash. In return, we are releasing TV Azteca from the 24-month lockup that prohibits TV Azteca from selling or transferring their shares of our common stock. And if they do not generate at least $1.6 million of gross proceeds from the sale of their stock, then on March 1, 2021, we will contribute additional capital to the party's strategic alliance in an amount equal to such shortage.

In summary, despite the unprecedented environment and significant impacts we felt from the pandemic, we continue to rightsize our business and pivot to offering more Multiplatform content and Interactive Services using the successful WPT model to guide the expansion of the Allied Esports business. We are thrilled with the reception of our online events and production services that we are generating. We remain optimistic in our growth opportunities as we continue to accelerate the development of the areas of our business that can realize benefits in the current operating environment while optimizing our operations and strengthening our balance sheet. We will now open the line for Q&A. Operator?

(Operator Instructions) Our first questions come from the line of Brian Kinstlinger of Alliance Global Partners.

Great. I was taking so many notes, I didn't quite, Tony, pick up the discussion and the details around your TV Azteca deal. Can you just reiterate what -- there's -- the details behind that and the capital, what they need to sell? And I just wasn't able to write it down fast enough.

Sure, Brian. I'd be happy to do that, and thanks for joining the call. As you may recall, our original agreement with TV Azteca, we had a commitment to invest $7 million into the strategic partnership that we had with them, $5 million of which has already been invested. And so we had $2 million remaining of ongoing commitment due over the next 2 years. As part of this recent amendment, we've now eliminated the $2 million of additional commitment. So we've basically fulfilled our entire obligation. And then on the flip side, what we've also done is TV Azteca shares, which they had purchased as part of the original strategic partnership, were subject to lockup. Those are now being released as well. And then essentially, there's a make-whole on that. So to the extent that they sell those shares and don't receive $1.6 million of gross proceeds from those sales, then we will do a make-whole on the difference between what they actually receive and $1.6 million.

And how many shares do they have? Can you just remind me? Is it...

Sure. It's about -- just around 750,000 shares.

Great. And then just moving to the business. Can you talk about the trend in your In-person? You gave a lot of details around what's going on right now, 35% less capacity, much lower food and beverage. In light of the some-odd 75% to 80% decline in revenue in the first quarter, should that be something more like 50% to 60% decline with a late opening to the quarter, a little less capacity but much lower numbers? I mean, how should we think about that? And is there any way to predict at all when capacity starts to increase even further?

Yes. No, it's difficult, obviously, as you know, Brian, with In-person, not knowing exactly how the COVID pandemic is going to play out. But I definitely feel that we're kind of have reached the bottom and are starting to trend back up again. And so as you mentioned on in-person, we had already been seeing a stable base of revenues coming from the sponsorship revenues that we were receiving tied to the Las Vegas Arena as well as some of the online event revenues and so forth. I think as you mentioned, as we now have the Esports Arena open again for a full quarter, you'll start to see that trend up again. And then I think the bigger -- the other big factor will be once we start booking more and more of those third-party events that we had been doing pre-COVID as well.

And have you done any of those yet? Have you started at least -- will come in for the future or not yet?

Yes. Jud can probably provide a little bit more color there, but we have started to do -- well, in fact we just did one the other day with our truck, and then we're starting to do some at the arena as well.

Yes, we have. Tony. Thank you.

And then you highlighted the drop in multicontent revenue. You mentioned music true-ups, sounded like a little less sponsorship, I assume, is ad demand and maybe some timing for events. Could you maybe split the 3 buckets up? What the decline result -- how much of the decline was from each one? And then specifically talk about what a music true-up is?

Sure. Yes. It's a little confusing because at a business level, we are seeing continued increased demand for our content, but music royalties is a little complicated, because we typically will get those paid in about 6 months in arrears, so there's a little bit of a lag period there. And so the vast majority of the decrease in pillar 2 or our multimedia content revenues this quarter came from a result of those true-ups from music royalties. The other piece that I mentioned earlier that also impacted, but not as much, was on the sponsorship side. Because we have sponsorship deals in place, but some of them, we don't recognize those revenues until the final tables are done. And because of the COVID-19 pandemic, those final tables got postponed. So when those come back, then we'll be able to recognize those revenues, but that also had an impact when compared to last year.

So what were the music royalties for the second quarter this year versus last year?

Yes. So the music royalties, you're talking about nearly $300,000 versus last year, it was about $700,000 for the quarter. And then -- so there was that and then also some of the true-ups.

Right. And so the true-up was how much?

So the true-up makes up the other difference, it was about $300,000, roughly.

Yes. And then I think this is more a long-term and a high-level strategic question. But maybe talk about your thoughts of your strategy at malls. At a high level, it sounds like your plans for breaking construction as soon as you'd hope to open mid-2021. But given the reluctance for, I would think, consumers to head to the mall, how are you -- is there any change in your thought process to how you go about this business in the near and medium term?

Yes. I think in general, we're still closely monitoring the situations of how the pandemic is moving along, and we're in constant dialogue with all those partners. In fact, we talked to one of them and they are thinking more like in the very near future. Whenever things are easing up a little bit more, we may do some top-up activities at some of their locations. Whereas the others, we're still talking on the permanent locations. But in the meantime, we try to figure out the better business arrangement that will cater for this kind of situations. So we're, in the meantime, also discussing those arrangements with these partners. But like what Tony has been saying, we just have to keep watching at the situations. When things are getting better, we will accelerate on that. And we still have strong belief that this will be a very good business areas for us to focus on in the long run.

I assume 1 mid-2021, it sounded like it was in the Northwest, and you'd hope maybe to have a second by the end of the year. So a good scenario for 2021 is having 2 locations? Would that be then the accurate statement in your view?

That would be a good scenario. But again, we really have to see how the economy is being opened up, what's the pacing on that.

Yes. Yes. The last question I have, I might have missed it, there were so many details. On WPT online, can you talk about how many subscribers you have at the end of the quarter? And how does that compare versus March in the year-ago period? And then last question is, how many Diamond subscribers?

Yes. Brian, this is Tony again. So we haven't publicly disclosed the actual subscriber numbers, but I'll give you kind of a ballpark, they're in the 5-figure range. And then, Adam, I don't know if you want to share a little bit of color in terms of how well the online piece of the WPT business has been doing.

Sure. So in terms of -- we started to actually see a tick up at the beginning of January because that's when we started our new initiatives. As the COVID crisis has increased and more people were at home, that just magnified. And in addition to that, we were -- we had transferred our talent online. So they became streamers, which are good best practices that will continue long after this is done. So what we really saw before Diamond was a substantial uptick in the overall ClubWPT. When we started in May, what I can say is that we had -- we were hoping to convert a certain amount, but our expectations were quickly realized within a week or so, and what we thought that first month would be. I think that we're now confident that Diamond will become a significant and definitely the fastest-growing part of ClubWPT for the remainder of the year.

Our next question is coming from the line of Derek Soderberg with Colliers Securities.

My first question relates to the online events compared to in person. So now that you guys have sort of had a full quarter of online events, I was wondering if you guys strip out the food, beverage, merchandise revenue from your typical in-person event, how has revenue per event from your online events performed relative to your traditional in-person events, and then maybe relative to what you guys expected to get from an online event back in May?

Sure. Why don't I go ahead and start, and then Jud can fill in a little bit as well. But the size of the third-party events, they can vary from anywhere from kind of 5 figures to the mid-6 figures, depending on the size of those events. But I think overall, we've been pretty pleased with how those have been playing out. And Jud, I don't know if you want to add a little bit more color in terms of some of the specific events.

Well, what I'd add too is, Derek, is the frequency at which we can do events online. So if you're comparing one event to an event in arena, there are different economics there versus what a player might pay for entering one particular event online versus coming in for an in-arena experience. However, the frequency at which we can do things online is much greater in detail. So I think that's kind of the main difference in just our operating practice there in online versus in arena.

Yes, I would also...

Go ahead.

I can also add to that is the business, the B2C part of it. Yes, B2C part, of course, food and beverage will have some impact, and all the retail part have some impact. But as we are doing more and more of these online events, we're also drawing in new customers, new engagement on the B2B side. Like, for example, we have announced EEG on the sports betting series that we're doing for them is a pure online event, which we never had those opportunities before. And we're running at the moment, the VALORANT series for -- the official series for Riot. It's pure for -- online event again. And this is something that we never had before. So as we do more of these online events, we're also attracting a lot of those new B2B opportunities, which can be lucrative as well.

Okay. Derek, this is Adam. I know your question was more focused on the esports side of the business, but the WPT has also put its events online during this time. And it's -- this will be a substantial impact, and it will be a substantial impact going forward. It basically switches the margin when you're not flying the whole group of people to Marrakech or Uruguay or wherever it is, and the scale is even greater. So as indicated by Frank, we had a main tour event, which was our largest main tour event of all time. We have an event going on right now with partypoker. That event in May was so successful that partypoker has jumped behind it and put $100 million of guarantees into the events that are going on right now.

So we feel like that is a substantial opportunity to really flip the cost, where we've always looked at the first pillar for the WPT, at least, as that's where you build your brand, that's where you probably will see in the long term, the lowest margins. But in this case, things change, and you're able to run events 24/7, and so we think that's going to be a great growth area going forward.

And then just kind of to piggyback on that, some of these points. With some of your team working in different locations and maybe your servers being in different locations, are you guys limited at all to the number of events you guys can hold online concurrently?

I think actually, first of all, the servers that we're using, they are the game servers provided by their publisher. So wherever they have those servers, we can run an event. We have a working team directly owned by us in Germany and one in United States, and we have partners team in Mexico and other locations as well. So with this big network, we can pretty much run around-the-clock online tournament, more than 24 hours if we need to. So I think we don't see any limitations. Once we get online, in fact, it really frees me up and our production capacity will increase dramatically because we're actually engaging in online now.

Okay. Great. And then just one final one. Back to the real money gaming. I know you'd mentioned it a little bit before, but I was wondering if you can maybe remind us how large of an opportunity that is for you guys. And then maybe when we might just start to see those opportunities really start to materialize on the top line.

Okay. That's the major first step for us. We have never done any content or tournament in this area before. This is the first trial. But I think that has a lot to do with our belief. We believe tournament esports, they're meant to accomplish some business objectives, and we have been designing a lot of our events to create entertainment. But in the meantime, we must satisfy our partners' business objectives. And this time, is our partner, EiG, which they want to launch their new online betting solutions, first time VIE.gg. And so we take one of our most popular series, this Legend Series, which we have been doing for a long time in Europe. And we adjust the format a little bit so that it will enable a more engaging experience for esports betting purposes for our partner. So again, this is the first time, and it's a license arrangement. We licensed our tournaments to them, and we redesigned some of the features of the stream and also the format of the tournament so that it will help their -- help them to achieve their goals better. And hopefully, on a rev-share deal, we should be able to get something much more meaningful in the long run.

There are no further questions at this time. I'd like to turn the call back over to management for any closing remarks.

Okay. Thank you. Thank you for your support, everyone, and joining us on today's call. We look forward to speaking with everybody again when we report our 2020 third quarter results in early November. Thank you again for your time and attention this morning, and please stay safe and healthy.

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great evening.