Allied Gaming & Entertainment, Inc. (NASDAQ: AGAE) (the
“Company” or “AGAE”), a global experiential entertainment company,
today announced financial results for the third quarter ended
September 30, 2023.
“We continue to make strides towards our strategic goals,
achieving positive net income driven by a significant reduction in
general and administrative expenses. Our commitment to growing
within the esports, gaming, and entertainment sectors remains
unwavering," stated Yinghua Chen, Chief Executive Officer of the
Company. "We are also excited to announce the closing of our
strategic investment in Beijing Lianzhong Zhihe Technology Co.
(“Zhihe”), which positions us as the largest shareholder,
strengthening our presence in the rapidly expanding mobile games
market and boosting our revenue and profitability."
Third Quarter 2023 Financial Results
Revenues: Total revenues of $1.1 million decreased 28% compared
to $1.6 million in the third quarter of 2022. The year-over-year
decrease was primarily attributable to a temporary decline in
in-person experience revenues at the Company’s Hyper X Arena in Las
Vegas.
Costs and expenses: Total costs and expenses were $1.8 million,
a decrease of 46% compared to the third quarter of 2022. The
improvement was driven by a strategic reduction in the Company’s
general & administrative expenses of 63%, which include cash
compensation, stock-based compensation, and the recognition of
employee retention credit refunds under the 2020 CARES and
subsequent acts, and a 48% decrease in the Company’s in-person
expenses. These decreases were partially offset by an increase in
depreciation and amortization expense, acquisition related
professional fees, and consulting fees incurred in connection with
other strategic investment opportunities.
Net income for the third quarter of 2023 improved significantly
to a positive $0.1 million compared to a net loss of $1.6 million
in the prior year period. Net income in the third quarter of 2023
includes approximately $716,000 of interest income earned on
short-term investments.
Furthermore, adjusted EBITDA loss was $0.2 million for the third
quarter of 2023, a considerable improvement from a loss of $1.8
million in the third quarter of 2022. A reconciliation of the
GAAP-basis net income (loss) to adjusted EBITDA is provided in the
table at the end of this press release.
Balance Sheet
As of September 30, 2023, the Company had a cash and short-term
investments position of $77.4 million, including $5.0 million of
restricted cash. This compared to $86.8 million in cash and
short-term investments at December 31, 2022, which also included
$5.0 million of restricted cash. At September 30, 2023, the Company
had a working capital position of $73.9 million compared to $79.1
million at December 31, 2022. AGAE’s working capital positions on
September 30, 2023 and December 31, 2022 were reduced by operating
lease liabilities of $1.4 million and $1.2 million, respectively,
recorded in connection with the Company’s implementation of the new
leasing standard (ASC 842) on December 31, 2022. As of September
30, 2023, the Company had approximately 36.8 million shares of
outstanding common stock.
During the third quarter, the Company bought back a total of
183,021 shares of its common stock at an average selling price of
$0.98 for a total cost of $171,355, excluding broker fees. 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.
Operational Update
Allied Esports produced 79 event days in the third quarter of
2023, with 44 proprietary event days and 35 third-party event days.
Third-party events were highlighted by Boxing Weekend Reception; a
Red Bull and Riot Games event; Hacker1, a 5-day hackathon event; a
Cox Communications event; and the UNLV Hockey Annual Giving Day.
The Company’s Omen Mobile Arena was also active during the quarter,
hosting events at the NHL Draft and three UNLV college football
games at Allegiant Stadium in Paradise, Nevada.
In addition, during the quarter, the Company rolled out a new
set of HP OMEN PCs and monitors to retrofit and update the gaming
zones within the HyperX Arena.
Corporate Developments
Subsequent to quarter end, AGAE announced the closing of the
previously announced strategic investment in Zhihe. As of October
31, 2023, AGAE has assumed a controlling interest in the Board of
Directors of Zhihe for purpose of financial statement consolidation
and became the largest shareholder of Zhihe, a prominent developer
and operator of casual mobile games with proven distribution
capabilities.
Third Quarter 2023 Conference Call
The Company will host a conference call today at 2:00 p.m.
Pacific Time / 5:00 p.m. Eastern Time to discuss its third quarter
2023 financial results. Participants may join the conference call
by dialing 1-833-816-1413 (United States) or 1-412-317-0505
(international).
A live webcast of the conference call will also be available on
Allied Gaming & Entertainment’s Investor Relations site at
ir.alliedgaming.gg. Additionally, financial information presented
on the call will be available on Allied Gaming &
Entertainment’s Investor Relations site. For those unable to
participate in the conference call, a telephonic replay of the call
will also be available shortly after the completion of the call,
until 11:59 p.m. Eastern Time on Thursday, November 23, 2023, by
dialing 1-844-512-2921 (United States) or 1-412-317-6671
(International) and using the replay passcode: 10183236.
About Allied Gaming & Entertainment
Allied Gaming & Entertainment, Inc. (Nasdaq: AGAE) is a
global experiential entertainment company focused on providing a
growing world of gamers with unique experiences through renowned
assets, products and services. For more information, visit
alliedgaming.gg.
Non-GAAP Financial Measures
As a supplement to our financial measures presented in
accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”), the Company presents certain non-GAAP measures of
financial performance. These non-GAAP financial measures are not
intended to be considered in isolation from, as a substitute for,
or as more important than, the financial information prepared and
presented in accordance with GAAP. In addition, these non-GAAP
measures have limitations in that they do not reflect all of the
items associated with the company’s results of operations as
determined in accordance with GAAP. Non-GAAP financial measures are
not an alternative to the Company’s GAAP financial results and may
not be calculated in the same manner as similar measures presented
by other companies.
The Company provides net income (loss) and earnings (loss) per
share in accordance with GAAP. In addition, the Company provides
EBITDA (defined as GAAP net income (loss) from continuing
operations before interest (income) expense, income taxes,
depreciation, and amortization). The Company defines “Adjusted
EBITDA” as EBITDA excluding certain non-cash and non-recurring
charges, such as stock-based compensation, business acquisition
transaction costs and impairment expense.
In the future, the Company may also consider whether other items
should also be excluded in calculating the non-GAAP financial
measures used by the Company. Management believes that the
presentation of these non-GAAP financial measures provides
investors with additional useful information to measure the
Company’s financial and operating performance. In particular, these
measures facilitate comparison of our operating performance between
periods and help investors to better understand the operating
results of the Company by excluding certain items that may not be
indicative of the Company’s core business, operating results, or
future outlook. Additionally, we consider quantitative and
qualitative factors in assessing whether to adjust for the impact
of items that may be significant or that could affect an
understanding of our ongoing financial and business performance or
trends. Internally, management uses these non-GAAP financial
measures, along with others, in assessing the Company’s operating
results, measuring compliance with any applicable requirements of
the Company’s debt financing agreements in place at such time, as
well as in planning and forecasting.
The Company’s non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles, and our
non-GAAP definitions of the “EBITDA” and “Adjusted EBITDA” do not
have a standardized meaning. Therefore, other companies may use the
same or similarly named measures, but include or exclude different
items, which may not provide investors a comparable view of the
Company’s performance in relation to other companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering the Company’s GAAP, as well as
non-GAAP, financial results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
Forward-Looking Statements
This communication contains certain forward-looking statements
under federal securities laws. Forward-looking statements may
include our statements regarding our goals, beliefs, strategies,
objectives, plans, including product and service developments,
future financial conditions, results or projections or current
expectations. In some cases, you can identify forward-looking
statements by terminology such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “intend” or “continue,” the negative of such terms, or
other comparable terminology. These statements are subject to known
and unknown risks, uncertainties, assumptions and other factors
that may cause actual results to be materially different from those
contemplated by the forward-looking statements. These
forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside our control, that could cause
actual results or outcomes to differ materially from those
discussed in these forward-looking statements. The inclusion of
such information should not be regarded as a representation by the
Company, or any person, that the objectives of the Company will be
achieved. Important factors, among others, that may affect actual
results or outcomes include: risks associated with the future
direction or governance of the Company; our ability to execute on
our business plan; the substantial uncertainties inherent in the
acceptance of existing and future products and services; the
ability to retain key personnel; potential litigation; general
economic and market conditions impacting demand for our services;
our inability to enter into one or more future acquisition or
strategic transactions ; and our ability, or a decision not to
pursue strategic options for the esports business. You should
consider the areas of risk described in connection with any
forward-looking statements that may be made herein. The business
and operations of AGAE are subject to substantial risks, which
increase the uncertainty inherent in the forward-looking statements
contained in this communication. Except as required by law, we
undertake no obligation to release publicly the result of any
revision to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. Further information on
potential factors that could affect our business and results is
described under “Item 1A. Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2022, as filed with the
SEC on March 24, 2023, as amended, as well as subsequent reports we
file with the SEC. Readers are also urged to carefully review and
consider the various disclosures we made in such Annual Report on
Form 10-K and in subsequent reports with the SEC.
Allied Gaming &
Entertainment, Inc. and Subsidiaries
Condensed Consolidated Balance
Sheets
September 30, December 31,
2023
2022
(unaudited) Assets Current Assets Cash and cash
equivalents
$
10,435,990
$
11,167,442
Short-term investments
59,950,000
70,000,000
Interest receivable
2,058,576
677,397
Due from affiliate
3,500,000
-
Accounts receivable
10,673
72,739
Prepaid expenses and other current assets
470,390
459,274
Total Current Assets
76,425,629
82,376,852
Restricted cash
5,000,000
5,000,000
Property and equipment, net
3,794,373
4,005,622
Digital assets
49,300
49,761
Intangible assets, net
688,721
72,786
Deposits
380,703
379,105
Operating lease right-of-use asset
5,411,841
5,845,549
Total Assets
$
91,750,567
$
97,729,675
Liabilities and Stockholders' Equity Current Liabilities
Accounts payable
$
470,264
$
317,561
Accrued expenses and other current liabilities
306,270
1,645,379
Deferred revenue
357,677
108,428
Operating lease liability, current portion
1,390,533
1,227,164
Total Current Liabilities
2,524,744
3,298,532
Operating lease liability, non-current portion
5,744,166
6,527,075
Total Liabilities
8,268,910
9,825,607
Commitments and Contingencies Stockholders' Equity Preferred stock,
$0.0001 par value, 1,000,000 shares authorized, none issued and
outstanding
-
-
Common stock, $0.0001 par value; 100,000,000 shares authorized,
39,085,470 shares issued at September 30, 2023 and December 31,
2022, and 36,842,663 and 38,503,724 shares outstanding at September
30, 2023 and December 31, 2022, respectively
3,909
3,909
Additional paid in capital
198,663,219
198,526,614
Accumulated deficit
(112,745,327
)
(110,235,568
)
Accumulated other comprehensive income
221,555
219,675
Treasury stock, at cost, 2,242,807 and 581,746 shares at September
30, 2023 and December 31, 2022, respectively
(2,661,699
)
(610,562
)
Total Stockholders' Equity
83,481,657
87,904,068
Total Liabilities and Stockholders' Equity
$
91,750,567
$
97,729,675
Allied Gaming &
Entertainment, Inc. and Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2023
2022
2023
2022
Revenues: In-person
$
1,119,865
$
1,551,963
$
3,580,968
$
3,734,400
Multiplatform content
94
13,679
2,000,518
1,401,130
Total Revenues
1,119,959
1,565,642
5,581,486
5,135,530
Costs and Expenses: In-person (exclusive of depreciation and
amortization)
575,176
1,112,645
1,891,229
2,784,933
Multiplatform content (exclusive of depreciation and amortization)
-
31,010
1,517,707
1,020,886
Selling and marketing expenses
51,448
54,445
172,987
185,614
General and administrative expenses
894,181
2,397,901
5,660,553
8,762,193
Depreciation and amortization
239,413
(328,739
)
1,030,191
1,288,106
Impairment of digital assets
-
-
-
164,411
Total Costs and Expenses
1,760,218
3,267,262
10,272,667
14,206,143
Loss From Operations
(640,259
)
(1,701,620
)
(4,691,181
)
(9,070,613
)
Other Income (Expense): Other (expense) income, net
(388
)
34,073
15,954
(45,859
)
Interest income, net
715,893
25,316
2,165,468
34,093
Total Other Income (Expense)
715,505
59,389
2,181,422
(11,766
)
Net income (loss)
75,246
(1,642,231
)
(2,509,759
)
(9,082,379
)
Other comprehensive income: Foreign currency translation
adjustments
-
(31,747
)
1,880
(90,378
)
Total Comprehensive Income (Loss)
$
75,246
$
(1,673,978
)
$
(2,507,879
)
$
(9,172,757
)
Net Income (Loss) per Common Share Basic
$
0.00
$
(0.04
)
$
(0.07
)
$
(0.23
)
Diluted
$
0.00
$
(0.04
)
$
(0.07
)
$
(0.23
)
Weighted Average Number of Common Shares Outstanding:
Basic
36,942,149
39,094,696
37,351,735
39,092,133
Diluted
36,942,149
39,094,696
37,351,735
39,092,133
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are non-GAAP financial measures and
should not be considered as a substitute for net income (loss),
operating income (loss) or any other performance measure derived in
accordance with United States generally accepted accounting
principles (“GAAP”) or as an alternative to net cash provided by
operating activities as a measure of AGAE’s profitability or
liquidity. AGAE’s management believes EBITDA and Adjusted EBITDA
are useful because they allow external users of its financial
statements, such as industry analysts, investors, lenders and
rating agencies, to more effectively evaluate its operating
performance, compare the results of its operations from period to
period and against AGAE’s peers without regard to AGAE’s financing
methods, hedging positions or capital structure and because it
highlights trends in AGAE’s business that may not otherwise be
apparent when relying solely on GAAP measures. AGAE presents EBITDA
and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA
are important supplemental measures of its performance that are
frequently used by others in evaluating companies in its industry.
Because EBITDA and Adjusted EBITDA exclude some, but not all, items
that affect net income (loss) and may vary among companies, the
EBITDA and Adjusted EBITDA AGAE presents may not be comparable to
similarly titled measures of other companies. AGAE defines EBITDA
as earnings before interest, income taxes, depreciation and
amortization of intangibles. AGAE defines Adjusted EBITDA as EBITDA
excluding stock-based compensation, business acquisition
transaction costs and impairment expense.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA from net loss, AGAE’s most directly comparable
financial measure calculated and presented in accordance with
GAAP.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net income (loss)
$
75,246
$
(1,642,231
)
$
(2,509,759
)
$
(9,082,379
)
Interest income, net
(715,893
)
(25,316
)
(2,165,468
)
(34,093
)
Depreciation and amortization
239,413
(328,739
)
1,030,191
1,288,106
EBITDA
(401,234
)
(1,996,286
)
(3,645,036
)
(7,828,366
)
Stock compensation
64,623
238,840
136,605
793,229
Business acquisition transaction costs
173,938
-
173,938
-
Impairment expense
-
-
-
164,411
Adjusted EBITDA
$
(162,673
)
$
(1,757,446
)
$
(3,334,493
)
$
(6,870,726
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108818234/en/
Investor Contact: Tyler Drew Addo Investor Relations
ir@alliedgaming.gg
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