Esports Entertainment hopeful on long-term plans amid Q1 decline

Esports Entertainment Group (EEG) recently reported a notable 71.9% decline in revenue, totaling $2.7 million (£2.2 million/€2.5 million) for the first quarter, largely attributed to the divestiture of its Bethard business earlier this year. Nevertheless, the company maintains an optimistic outlook regarding its long-term growth strategies.

In February, EEG finalized the sale of its Bethard online casino and sportsbook for €9.5 million, completing the transaction later that month and fully offloading the business.

Furthermore, EEG announced the gradual wind-down and impending liquidation of its Argyll entities, with revenue-producing operations ceasing in December. This transition has significantly influenced year-over-year performance metrics.

Despite the abrupt revenue downturn, CEO Alex Igelman expressed confidence in the company’s future. He underscored the importance of the recent organizational restructuring and how it positions EEG to foster growth and implement cost-reduction strategies.

Shortly after the close of Q1, EEG entered into an agreement to acquire a 30% minority stake in esports content production company Drafted.gg. According to Igelman, this acquisition aligns with the company’s long-term strategic objectives.

“In recent months, we have conducted a thorough review of our operations, focusing on anticipated trends in esports and igaming,” Igelman stated. “This comprehensive analysis involved scrutinizing every facet of our business to pinpoint unprofitable operations and contracts.”

“We have taken decisive actions, paving the way for a promising future. While these restructuring efforts incurred one-time costs, we anticipate long-term benefits that will dwarf these expenditures, including an expected annual reduction in operational costs exceeding $4 million.”

“This is a transformative period for our organization. It signifies a fresh beginning and a strategic pathway toward realizing our full potential, which we believe will translate into substantial revenue growth and augmented long-term shareholder value.”

Revenue Decline Across iGaming and Gaming Segments in Q1

In examining Q1 results, revenue across EEG’s core segments experienced considerable decline. Specifically, iGaming revenues, encompassing online betting and casino operations, plummeted by 76.7% to €2 million. Additionally, gaming revenue from esports and ancillary activities fell by 27.3%, reaching €733,768.

EEG highlighted that its Lucky Dino brand faced adverse impacts from deteriorating investment climates and regulatory changes in Finland and the UK commencing in fiscal 2023, contributing to continued revenue declines.

Geographically, U.S. operations accounted for $733,768 of total revenue, while international activities generated $2 million during this period.

The divestment of specific assets led to a dramatic reduction in the cost of revenue, which saw an 81.3% decrease to $602,026 in Q1. Additionally, costs associated with sales, marketing, and general administration also declined, resulting in a total operating expense reduction of 51% to $7.7 million.

Widening Net Loss Despite Cost-Cutting Measures

After factoring in $214,989 in other income, the pre-tax loss stood at $4.8 million. Despite implementing significant cost-saving measures, this loss represents a widening from the $4.2 million reported in the previous year.

EEG did not incur tax liabilities, which means the net loss for the quarter also amounted to $4.8 million, up from $4.2 million year-over-year. However, the adjusted EBITDA loss showcased improvement, shrinking from $1 million in Q1 2022 to a refined loss of $354,870 this year.

CEO Predicts a Promising Horizon for EEG

As Q1 concluded, CEO Igelman reiterated his focus on EEG’s long-term aspirations. Emphasizing the necessity of evolving initiatives, he indicated that a renewed commitment to advancing esports and igaming solutions would facilitate the creation of a holistic, end-to-end online betting ecosystem for consumers.

“Our strategic partnerships have cultivated a resilient ecosystem that benefits both our clients and the end-users,” Igelman noted. “A primary goal for us is to uphold the highest standards in gaming integrity and audit processes, ensuring our content aligns with stringent regulatory requirements for skill-based wagering.”

“We plan to initiate a comprehensive integrity audit of Drafted.gg conducted by a third-party entity to meet state-specific standards and bolster our anticipated swift expansion within the expansive U.S. market.”

“We are genuinely enthusiastic about the future prospects of EEG, driven by the potential intrinsic to our strategic investments, and we are confident that our trajectory is distinctly upward.”