Esports Entertainment Group considers cost-cutting as EBITDA losses triple
Nasdaq-listed operator slashes red ink despite 191% year-on-year increase in revenue during its third quarter
Esports Entertainment Group (EEG) has reported continued downturns in EBITDA and cash flow in its fiscal Q3 results, following massive losses in Q2.
At a group level, company EBITDA almost tripled for EEG in its Q3 results from an EBITDA negative figure of $2.6m to a negative loss of $7.3m.
In its latest financial results, the firm saw its operating losses balloon from $5.6m (£4.48m) in Q3 2021 to $50.6m in 2022, a loss increase of more than 803% year-on-year. Combined with $12.9m in other expenses, this left EEG with an overall pre-tax loss of $63.6m.
EEG also paid out $200,628 in dividends and $73,136 in additional stock-related costs. This left the business with a total net loss of $63.8m, more than five times the $12.4m loss in Q3 2021.
Elsewhere, the Nasdaq-listed firm saw its Q3 revenue rise to $15.7m, up from $5.4m, as a result of the company’s M&A activity in recent years. These included Argyll Entertainment in July 2020, Lucky Dino in March 2021 and Bethard in July 2021.
The firm’s online betting and casino side saw revenue increase by 108.8% to $14.6m from $5.2m. Likewise, the esports division saw an astronomical 538.7% rise to $1.1m.
To address these ongoing challenges and achieve growth, chief executive Grant Johnson said the business needs to take action to alter its repayment plans and cut costs dramatically.
Johnson said: “To address our liquidity position and improve our ability to invest in the business and adequately support our growth initiatives, we are actively working with our lender on key modifications to the loan and hope to have more to share on this front in the near-term.”
In his statement, Johnson said EEG will use a number of strategies to try and reach these goals. These include simplifying its esports offering with an increased focus on Software-as-a-Service-based technology under the ggCircuit brand, in-person tournaments under the EGL brands and its P2P wagering platform.
The other main strategy is to cut costs across all of EEG’s seven brands, including removing duplicate functions and de-emphasising non-core assets. Johnson said that EEG expects to record material savings over the next year through an adapted marketing strategy and implementation strategies to drive operating efficiency.
Johnson added: “We are encouraged by the early results of these efforts and expect them to have a significant positive impact on our future results, including our progress towards profitability, with a goal to achieve break-even on an annualised basis by early fiscal 2023.
“Despite this momentum, we are addressing several near-term challenges which are constraining our ability to grow the business and to drive that growth to the bottom line,” Johnson concluded.
EEG’s share price was down 9% in early trading today to $0.40.