EEG loses $50 million in eSports and sports betting business

Esports Entertainment Group (EEG) announced that it will review its operating portfolio in order to improve its current net income.

In publishing its latest financial results, the Nasdaq-listed operator highlighted that despite posting an increase in corporate revenue to $15.7 million, it faced a number of “short-term challenges” impacting its bottom-line performance.

“Our recent results illustrate the growing momentum in iGaming and eSports, which have benefited from a more normalized operating environment,” said Grant Johnson, CEO of EEG.

EEG benefited from ‘record performance’ from proprietary brand Lucky Dino, along with ‘more balanced maintenance’ of its sports betting portfolio.

Despite seeing in-game growth, EEG said it had a loss of $38 million related to its “non-monetized sports assets” of Helix, ggCircuit and EGL.

By 2020, EEG had acquired its sports betting portfolio by doing back-to-back deals with Helix and the Esports Gaming League (EGL) for $50 million in total.

“We do not see a path to attractive profitability in the Helix business given its significant overhead and ongoing capex and we are currently working to ‘divest’ from our two existing centers.” – read Johnson’s CEO review.

“ggCircuit and EGL are two assets that we have not been able to effectively monetize due to liquidity constraints.”

“To address our liquidity position and improve our ability to invest in the business and properly support our growth initiatives, we are actively working with our lender on key loan modifications and look forward to having more to share on this front in the near term.”

A complicated time for EEG

The onerous negotiation period saw EEG account for a total operating expense of US$66 million (impairment + commercial costs) – which resulted in the declaration of a loss of US$50 million.

Other impacts have seen EGG halve its corporate cash balance to $9.4 million from $20 million as reported in June 2021 – as the company’s asset value declines to $85 million.

Updating investors, EEG’s leadership stated that their focus would be to achieve aggressive cost savings across the entire group structure by reviewing spending across both the eSports and betting verticals.

As a result, EEG has provided a more prudent financial outlook in which it expects to achieve annual revenues in the range of $55 to $60 million from its previous target of $70 million.

Johnson commented on the EEG outlook – “As we look to the future, the building blocks for further growth remain firmly in place. However, current market conditions are different and as such our team has adjusted to focus on reach breakeven as soon as possible”.

“While we’ve come a long way in a short period of time, there’s a lot of work ahead as we become a leaner organization that can operate more efficiently and create greater value for our partners and shareholders,” Johnson concluded.