Sponsorship and live events drive revenue growth at Allied in 2022

Allied Gaming & Entertainment has announced a strategic restructuring of its esports business aimed at enhancing growth following a successful 2022, marked by a substantial year-on-year revenue increase.

The decision for restructuring was revealed at the conclusion of the fourth quarter. This initiative is designed to broaden the company’s market focus, thereby allowing Allied to diversify into a wider spectrum of entertainment and gaming products and services, instead of pursuing a singular business combination transaction.

The strategic review underscored that the shareholders’ interests would be best served by this comprehensive approach. Furthermore, effective December 1, the company underwent a rebranding initiative to adopt the name Allied Gaming & Entertainment.

Although this restructuring came too late to influence the fourth-quarter performance or the overall annual results, Chief Executive Yinghua Chen expressed optimism that it will lay the groundwork for robust growth in 2023 and the future.

“Our forward path emphasizes an expansion from our original focus on live events and multi-platform content. We are also integrating new revenue streams, including live virtual entertainment events and online gaming tournaments, which we believe will yield significantly positive financial results in the long term,” said Chen.

Fourth Quarter Performance Insights

Analyzing Allied’s performance in the fourth quarter, revenue for the three months ending December 31 amounted to $1.2 million, reflecting a 36.8% decline from $1.9 million reported in the prior year.

This revenue decline has been attributed to the transient nature of the company’s live streaming partnership with Trovo established in 2021. Notably, nearly all revenue during this period was generated from in-person operations, with a mere $428 reported from multi-platform content.

Despite the dip in revenue, Allied successfully reduced operating costs by 33.3%, lowering them to $3.8 million and resulting in an operating loss of $2.6 million, which is a significant improvement compared to the $3.8 million loss experienced in 2021.

The company reported $954,077 in other income, which included $755,209 in interest income, leading to a pre-tax loss of $1.7 million, compared to a $3.8 million loss in the same quarter last year.

Allied did not incur any tax obligations during the fourth quarter, resulting in a net loss of $1.7 million, down from the $6.3 million loss recorded the previous year. The latter figure was notably affected by a $2.6 million loss tied to the sale of assets in the World Poker Tour (WPT), resulting from a divestiture to Element Partners for $105 million.

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) for the quarter reached a loss of $1.7 million, though this marked an improvement from the $2.1 million loss reported in 2021.

Annual Financial Overview

Turning to the annual performance, Allied reported a revenue increase of 28.0%, reaching $6.4 million compared to the previous year. This growth was primarily driven by a rise in sponsorship revenue and income generated from live events hosted at the HyperX Arena and its Allied Esports Truck operations.

Of the total annual revenue, $6.1 million was derived from in-person activities, with $251,558 coming from multi-platform content.

Operating costs decreased by 12.6%, settling at $18.1 million, resulting in a reduced operating loss of $11.8 million compared to $15.8 million in 2021. After factoring in $942,311 in other income, the pre-tax loss for the year totaled $10.8 million, which also reflected an improvement from the prior year’s loss of $15.1 million.

Similar to the fourth quarter, Allied did not realize any tax charges, resulting in a net loss of $10.8 million. This contrasts sharply with the previous year’s net profit of $62.9 million, influenced heavily by the sale of WPT assets that yielded a gain of $77.9 million.

Adjusted EBITDA for the overall year showed a loss of $8.6 million, yet this also marked a better position compared to the $10.5 million loss recorded in 2021.

“We realized significant momentum in 2022, with revenues increasing by 28% over the prior year, largely fueled by the uptick in live events at our HyperX Arena in Las Vegas and our Allied Esports Truck, along with enhanced sponsorships from our inaugural content series, Elevated,” Chen emphasized.

“Additionally, our rebranding to Allied Gaming & Entertainment better encapsulates our evolution as a global experiential entertainment entity and concludes our strategic review process.”