Revenue plummets at Esports Entertainment in FY23

Esports Entertainment Group (EEG) has reported a substantial revenue decline of 60.6% for the full fiscal year ending June 30, 2023. However, the company has successfully implemented cost-reduction strategies, significantly lowering its net loss.

On October 16, EEG released a comprehensive strategic update detailing its financial performance and operational activities over the past year.

The fiscal year ending June 30, 2023, was tumultuous for EEG, following a challenging financial landscape in 2021. In October 2022, the company faced the prospect of insolvency after defaulting on $35 million in convertible notes issued in 2021. By December, EEG contemplated exiting the igaming sector entirely and underwent significant leadership changes, including the departure of former CEO Grant Johnson. At that time, the company narrowly avoided delisting from the Nasdaq stock exchange.

January 2023 saw further leadership upheaval as Daniel Mathews resigned from his roles as CFO and COO. Additionally, Johnson initiated a lawsuit against EEG, alleging wrongful termination regarding his dismissal.

In a pivotal move, EEG announced the sale of its Bethard online casino and sportsbook in February, finalizing the transaction for €9.5 million. By April, new CEO Alex Igelman outlined strategic plans for B2C expansion, divestment of non-core assets, and a debt restructuring initiative that involved exchanging a significant portion of its liabilities for equity.

Financial Overview

For the fiscal year 2023, EEG generated total revenues of $23 million (£18.9 million/€21.8 million), a stark decrease from $58.4 million in 2022. Notably, the cost of revenue fell sharply to $8.8 million, reflecting a 63.6% decline.

The company achieved its most significant reduction in sales and marketing expenses, which plummeted 77% to $5.9 million. General and administrative expenses also decreased, amounting to $28.9 million—a 43.6% reduction. Consequently, EEG recorded a net loss of $32.2 million, a marked improvement from the staggering loss of $102.2 million reported in the previous financial year.

CEO Alex Igelman highlighted the strategic transformations undertaken as pivotal to the company’s future. “In recent months, we have comprehensively evaluated our organization, focusing on the projected growth trajectories within the esports and igaming sectors. This process allowed us to identify unprofitable operations and contracts, driving decisive actions that set us on a path toward a more sustainable future,” Igelman stated.

He added, “Despite the one-time costs associated with restructuring, we are confident that the long-term benefits will vastly outweigh these challenges.”

Strategic Initiatives and Future Outlook

Looking ahead, EEG anticipates an annual operating expense reduction of $4 million and has successfully decreased total liabilities by approximately $51.8 million since January. Igelman elaborated on the company’s recent initiatives within the esports and igaming landscape.

“We firmly believe that the strategic initiatives we have enacted this year will position EEG in a stronger financial stance, aligning us with the burgeoning esports wagering market, which is projected to experience significant growth by 2025,” Igelman stated. “The outlook for our business has never been more promising.”