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ESE Entertainment Reports Second Quarter 2022 Results

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  • Record quarterly revenue of $15.0 million, year-over-year increase of 1,994%
  • Record gross profit of $3.8 million, year-over-year increase of 2,748%
  • Record adjusted EBITDA1 of $884,751

VANCOUVER, British Columbia, June 16, 2022 (GLOBE NEWSWIRE) -- ESE Entertainment Inc. (“ESE” or the “Company”) (TSXV: ESE) (OTCQB: ENTEF), a gaming and esports company that provides a range of services to leading video game developers and publishers, is pleased to announce that is has filed its unaudited condensed interim consolidated financial statements (the “Financial Statements”) and related management’s discussion and analysis (the “MD&A”) for the three months ended April 30, 2022 (“Q2 2022”) the highlights of which are presented in this news release. The Financial Statements and MD&A are available on www.sedar.com and on the Company’s website.

Second Quarter 2022 Financial and Operating Highlights:

  • Revenue of $15.00 million for Q2 2022, representing a 1,994% increase from revenue for the three months ended April 30, 2021 of $0.72 million.
  • Gross profit of $3.82 million for Q2 2022, representing a 2,748% increase from gross profit in Q2 2021 of $0.13 million.
  • Adjusted EBITDA1 of $884,751 in Q2 2022, compared to adjusted EBITDA loss of ($832,195) in Q2 2021.
  • Total assets as at April 30, 2022 of $38.06 million, compared to total assets as at April 30, 2021 of $15.94 million.

“We are excited to share our Q2 2022 financial performance with shareholders, which is our seventh straight quarter in a row of record growth. This was the first quarter that included the financial performance of our most recent acquisition, Gameaddik. The combined operations have proven to deliver record revenue growth, improve margins, and reach a critical milestone of achieving positive adjusted EBITDA for the first time in company history. This performance is a testament to our entire team, which continues to execute at the highest level and deliver on our business plan and growth strategy. As we start to unlock synergies of the combined operations, we are setting our sights on continued organic growth,” stated Konrad Wasiela, CEO of ESE.

———————————————————

1 Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release.

Q2 2022 Operational Highlights:

  • Announced a partnership agreement with Opera, one of the world’s major browser developers and a leading internet consumer brand. The agreement focuses on providing advertising services in connection with the promotion of Opera GX, Opera’s gamer-oriented browser
  • Completed the acquisition of 9327-7358 Quebec Inc. DBA Gameaddik, adding new technology to ESE’s global 360 esports business
  • Appointed the Founder and CEO of Gameaddik, Eric Jodoin, as the Chief Operating Officer (COO) of ESE Entertainment
  • Announced that the Company’s subsidiary, Digital Motorsports signed a reseller agreement with Corsair Gaming – a leading global developer and manufacturer of high-performance gaming gear
  • Announced that its media division, Frenzy, is launching a new broadcast studio in Warsaw, Poland. The first project produced from the new studio will be VRL East: Surge, a competition in the game VALORANT carried out in 20 countries
  • Announced that it has started a new division of its business focused on expanding its existing business products and services to internet gambling companies
  • Signed a Partnership Agreement with Waveform Entertainment Inc., a highly regarded esports entertainment company with clients that include ESL Gaming (recently merged and sold as ESL Faceit Group to Savvy Gaming Group), DreamHack, Ubisoft, Redbull, and more
  • Announced a Partnership Agreement with Cowana GmbH (“Cowana”), a highly regarded European esports entertainment company with clients that include Bethesda Softworks, Capcom, NVIDIA, BENQ, and more

The following table presents a reconciliation of Net income (loss) to Adjusted EBITDA for the three months ended April 30, 2022, and the three months ended April 30, 2021:

 Three months ended
April 30, 2022
 Three months ended
April 30, 2021
 
(In Canadian dollars) $
(unaudited)
 $
(unaudited)
 
Net loss(2,014,133)(3,814,622)
Provision for income taxes319,713 735 
Depreciation104,696 5,181 
Commissions52,702 4,704 
Finder's fees and stamp duty for acquisitions749,624 1,000,498 
Share-based payments1,629,218 1,981,730 
Interest47,068 - 
Impairment of K1CK assets - 
Accretion33,005 - 
Foreign exchange (gain) loss(37,142)-10,421 
Adjusted EBITDA1 884,751   (832,195
)

1 Adjusted EBITDA is a non-IFRS measure. Refer to “Non-IFRS Measures” at the end of this press release.

The financial and operating results included in this news release are based on the Financial Statements and the MD&A, which were released on June 16, 2022. It is only in the context of the fulsome information and disclosures contained in the Financial Statements and MD&A that an investor can properly analyze this information. The Financial Statements and MD&A will be published under the Company’s profile on SEDAR at www.sedar.com.

All amounts are in Canadian dollars.

ESE Entertainment Inc.

Konrad Wasiela
Chief Executive Officer and Director

About ESE Entertainment Inc.
ESE is a Europe based entertainment and technology company focused on gaming and esports. The Company provides a range of services to leading video game developers, publishers, and brands by providing technology, infrastructure, and fan engagement services internationally. ESE also operates its own ecommerce channels, esports teams, and gaming leagues. In addition to the Company’s organic growth opportunities, the Company is considering selective acquisitions that align with its objective of becoming a dominant global player in esports technology and infrastructure. | www.esegaming.com

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This news release contains certain statements that may constitute forward-looking information under applicable securities laws. All statements, other than those of historical fact, which address activities, events, outcomes, results, developments, performance or achievements that ESE anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Such information may involve, but is not limited to, statements with respect to the Company’s ability to unlock and benefit from synergies from its acquisitions and the Company’s continued growth. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results "may", "could", "would", "might" or "will" (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking information is based on currently available competitive, financial and economic data and operating plans, strategies or beliefs as of the date of this news release, but involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of ESE to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors may be based on information currently available to ESE, including information obtained from third-party industry analysts and other third-party sources, and are based on management's current expectations or beliefs regarding future growth, results of operations, future capital (including the amount, nature and sources of funding thereof) and expenditures. Any and all forward-looking information contained in this press release is expressly qualified by this cautionary statement. Trading in the securities of ESE should be considered highly speculative.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about ESE’s prospective results of operations, revenues and margins and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraph. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about ESE’s future business operations. ESE disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.

NON-IFRS MEASURES

This press release includes references to adjusted EBITDA. Adjusted EBITDA is a non-IFRS financial measure and is defined by the Company as net income or loss before income taxes, depreciation, commissions, finder's fees and stamp duty for acquisitions, share-based payments, interest, impairment of assets, accretion, and foreign exchange gain or loss. We believe that adjusted EBITDA is a useful measure of financial performance because it provides an indication of the Company’s ability to capitalize on growth opportunities in a cost-effective manner, finance its ongoing operations and service its financial obligations.

This non-IFRS financial measure is not an earnings or cash flow measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Our method of calculating such a financial measure may differ from the methods used by other issuers and, accordingly, our definition of this non-IFRS financial measure may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-IFRS financial measures should not be construed as an alternative to net income determined in accordance with IFRS as indicators of our performance or to cash flows from operating activities as measures of liquidity and cash flows.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE ESE Entertainment Inc.

For further information about ESE, please contact:
Apollo Shareholder Relations
investors@esegaming.com
+1 604-259-7540


ESE ENTERTAINMENT INC.
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited - Prepared by Management)

 April 30, 2022
 April 30, 2021
 
 (unaudited) (audited) 
ASSETS  
   
Current assets  
Cash$2,498,993 $4,825,072 
Receivables (Note 8) 7,156,762  844,148 
Prepaid expense and deposits 519,683  448,616 
Inventory 613,684  406,549 
  10,789,122  6,524,385 
   
Property and equipment (Note 9) 1,488,938  346,995 
Other assets 501,608  - 
Deposit (Note 10) 287,864  311,219 
Unallocated purchase price (Notes 5, 6 and 7) 24,989,451  8,761,762 
   
Total assets$38,056,983 $15,944,361 
   
LIABILITIES  
   
Current liabilities  
Accounts payable and accrued liabilities (Notes 11 and 18)$3,718,751 $1,000,785 
Current portion of lease liabilities (Note 12) 189,068  71,574 
Frenzy and GameAddik acquisition payment commitment (Notes 6 and 7) 3,934,123  - 
Deferred revenue (Note 19) 262,867  234,390 
  8,104,809  1,306,749 
   
Loans and credit facilities (Note 13) 367,493  - 
Convertible notes (Note 14) 2,661,197  - 
Lease liabilities (Note 12) 238,735  126,551 
  11,372,234  1,433,300 
   
EQUITY  
Share capital (Note 15) 41,996,442  28,707,147 
Share subscriptions received 12,756  1,050 
Commitment to issue shares (Notes 5, 6 and 15) 4,883,853  4,755,754 
Contributed surplus 4,757,520  2,388,107 
Accumulated other comprehensive loss (11,764) (107,129)
Deficit (24,976,159) (21,202,268)
Equity attributable to shareholders 26,662,648  14,542,661 
Non-controlling interest 22,101  (31,600)
   
Total equity 26,684,749  14,511,061 
   
Total liabilities and equity$38,056,983 $15,944,361 


ESE ENTERTAINMENT INC.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
For the three and six months ended April 30, 2022 and 2021
(Expressed in Canadian Dollars)
(Unaudited - Prepared by Management)

 For the three months ended
April 30,
For the six months ended
April 30,
  2022  2021  2022  2021 
Revenue$15,002,676 $716,293 $23,028,370 $908,799 
Cost of sales 11,177,780  582,012  17,791,750  582,012 
Gross profit  3,824,896  134,281  5,236,620  326,787 
     
Expenses    
Advertising and event planning 291,682  160,524  1,017,633  307,053 
Depreciation (Note 9) 104,696  5,181  180,970  5,181 
Bank charges 10,822  14,189  18,995  16,312 
Consulting fees (Note 18) 145,133  491,210  633,379  984,878 
Commissions 52,702  4,704  76,822  4,704 
Finder’s fees paid for acquisitions (Note 4, 5, 6 and 7) 749,624  1,000,498  1,007,215  1,000,498 
Office and miscellaneous 708,155  27,802  1,141,593  68,558 
Professional fees (Note 18) 504,062  179,752  674,717  260,836 
Rent 88,238  3,846  96,161  5,787 
Share-based payments (Notes 15 and 18) 1,629,218  1,981,730  2,155,419  2,258,475 
Transfer agent and filing fees 41,853  43,466  90,569  73,313 
Travel and conferences 65,720  8,995  101,911  12,738 
Investor relations 30,613  -  30,613  - 
Wages and benefits 1,025,802  46,508  1,187,538  125,053 
Website hosting and development 25,812  6,288  142,047  7,888 
  5,474,132  3,974,693  8,555,582  5,131,274 
     
Loss before other items (1,649,236) (3,840,412) (3,318,962) (4,804,487)
Other items:    
Other (expense) income (2,253) 16,104  (12,049) 16,104 
Interest expense (47,068) -  (55,250) - 
Accretion expense (Note 14) (33,005) -  (33,005) - 
Impairment of K1CK assets (Note 20) -  -  -  (207,500)
Foreign exchange gain 37,142  10,421  26,851  21,902 
  (45,184) 26,525  (73,453) (169,494)
     
Net loss for the period before taxes (1,694,420) (3,813,887) (3,392,415) (4,973,981)
Provision for income taxes (319,713) (735) (327,775) (735)
Net loss for the period  (2,014,133) (3,814,622) (3,720,190) (4,974,716)
     
Other comprehensive (loss) income     
Gain (loss) on translation of foreign operations (103,095) (2,357) 95,365  (12,909)
Total comprehensive loss for the period$(2,117,228)$(3,816,979)$(3,624,825)$(4,987,625)
     
Net income (loss) attributable to:    
Shareholders of the Company
 (2,115,269) (4,181,056) (3,773,891) (5,341,150)
Non-controlling interests
 101,136  366,434  53,701  366,434 
Net loss for the period (2,014,133) (3,814,622) (3,720,190) (4,974,716)
Total comprehensive income (loss) attributable to:    
Shareholders of the Company (2,218,364) (4,183,413) (3,678,526) (5,354,059)
Non-controlling interests 101,136  366,434  53,701  366,434 
Total comprehensive loss for the period (2,117,228) (3,816,979) (3,624,825) (4,987,625)
     
Basic and diluted loss per common share$(0.03)$(0.10)$(0.06)$(0.13)
Weighted average number of common shares outstanding 70,375,651  43,290,103  65,886,490  41,775,338 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.


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