Greetings, and welcome to Allied Esports Entertainment Third Quarter 2020 Earnings Conference Call. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded.

Thank you, operator. Good afternoon, and welcome to the Allied Esports Entertainment 2020 Third Quarter Results Conference Call. Speaking on the call today is Allied Esports Entertainment's Chief Executive Officer, Frank Ng; and Chief Financial Officer, Tony Hung. The company's President and long-time World Poker Tour's CEO, Adam Pliska; and Jud Hannigan, who is leading the Allied Esports operations, are also available for the question-and-answer session. Before I turn the call over to management, please remember that our prepared remarks and responses to questions may contain forward-looking statements. Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors discussed in the company's public filings, including the risk factors discussed in documents filed with the Securities and Exchange Commission. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that these expectations will be attained. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The company's earnings release, which was issued this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. With that, it's now my pleasure to turn the call over to Allied Esports Entertainment's CEO, Frank Ng.

Thank you, Lasse, and thank you, everyone, for joining us this afternoon. I'm extremely pleased with the resiliency of our business and the solid performance we delivered in the third quarter despite the significant challenges we faced in the first half of 2020 arising from the COVID pandemic that persisted throughout the quarter. While strong results in the in-person total of our business was our primary growth driver for the company prior to the onset of the pandemic, operational restrictions, including extremely limited social gatherings mandated globally, impacted this part of our business model for both Allied Esports and the WPT during the third quarter. In light of this, I continue to be very pleased with our team's ability to adapt to the challenges by successfully pivoting our operational focus to our Multiplatform Content and Interactive Services pillars. Solid third quarter revenue growth in Multiplatform Content and Interactive Services pillars significantly mitigated the impact of the pandemic on our businesses as we continue to serve the esports and poker community. In addition, as Tony will discuss further, we made aggressive strides to pay down our convertible debt principal to $3.1 million. As we look ahead, we believe that the strategic pivots we made as a result of the pandemic has accelerated our ability to monetize all three pillars of our strategy. Importantly, we believe this has put us in a great position to better serve our customers in the future and take full advantage of the significant growth opportunities as the economy continues to recover and the environment normalizes. Despite the near-term impact the pandemic has had on our financials, we do see a longer-term silver lining for Allied Esports and WPT. As gamers abide by stay-at-home restrictions and with fewer entertainment options during the pandemic, gaming is filling the void, and its popularity is clearly on the rise. On the esports side, more time is spent on gaming. The proportions of gamers who spend over 5 hours per week gaming jumped from 63% to 82% during the pandemic. Similarly, more money is being spent on gaming. The gaming industry has experienced a 39% increase in gaming spend when compared to pre-pandemic levels and is expected to increase an additional 21% post-pandemic relative to spending before COVID-19. And finally, gamers are watching more esports content. Audiences watched 7.5 billion hours of content across all live streaming platforms in the third quarter. Year-over-year, the live streaming industry is up 92% compared to Q3 2019. With that, let's shift gears and review our third quarter results. Total revenues for the quarter were $5.9 million, declining just 2.5% from $6 million in the third quarter last year. Considering the significant restrictions we had in our ability to operate our in-person events for both Allied Esports and WPT, we are pleased with the results. During the quarter, we generated strong year-over-year growth in Interactive Services revenue as well as a solid increase in revenue from Multiplatform Content. However, this was offset by sharply lower revenue from in-person experiences as a result of COVID-19 that persisted throughout the third quarter. As announced earlier in the year, we took significant actions to reduce our expenses and minimize the negative impacts on our financial position resulting from the pandemic. These actions, which included salary reductions and other cost savings measures, reduced our G&A and selling and marketing expenses by $1.7 million this quarter versus the same period last year. At the bottom line, our adjusted EBITDA loss of $1.1 million improved significantly from an adjusted EBITDA loss of $2.1 million a year ago, marking the third quarter as the best quarterly adjusted EBITDA results since we entered the public market one year ago. Overall, we remain confident in our ability to capitalize on the valuable positions we created in the burgeoning esports marketplace, while WPT continues to steadily build its business and we believe has a promising outlook. As we have stated previously, our goal is to maximize the potential of these complementary businesses through a model built around three strategic pillars: in-person experiences, Multiplatform Content, and Interactive Services. With that, let's turn to our third quarter operational highlights as well as an update on the previously announced strategic partnerships, beginning with in-person experiences. Similar to most businesses in the live entertainment and event industry, in-person experiences for both Allied Esports and WPT continued to face significant operational headwinds during the third quarter. Looking first at Allied Esports. After being forced to completely shut down due to the pandemic on March 17, our flagship HyperX Esports Arena Las Vegas at the Luxor Hotel & Casino successfully reopened on June 25 with certain restrictions and a modified schedule for daily play and weekly tournament. To ensure the health and safety of guests and team members, HyperX Esports Arena has implemented extensive sanitization protocols throughout the venue and has deployed reduced operating hours. Furthermore, enforced physical distancing remained in effect throughout the quarter, lowering customer capacity by approximately 35% of pre-pandemic levels, with food and beverage service also limited. We believe we have earned the trust of our customers to provide a safe place to play with our enhanced safety and sanitization protocols. That said, since the reopening, the demand we have seen for our weekly tournaments is very encouraging. Third quarter highlights included a weekly event at HyperX Esports Arena, Friday Frags, featuring Fortnite; and Saturday Night Speedway, featuring Mario Kart. Both have shown considerable growth across all viewing metrics in the third quarter compared to the first quarter pre-pandemic levels. Most notably, unique viewers increased 1,144% with Friday Frags and 136% with Saturday Night Speedway as compared to the pre-pandemic levels in the first quarter of 2020. While in-person events continued to be limited by the pandemic, during the third quarter, we were pleased to execute two events with the HyperX Esports Truck, including an outdoor event with local Saturday Night Speedway sponsor, Findlay Volkswagen. After a five-month hiatus, the WPT also resumed the in-person pillar of its business during the third quarter. In August, the WPT returned to live poker with the record-setting WPT Japan event in Tokyo. The event drew 726 players in WPT's first live event since March 2020 and marked the first time WPT secured a mainstream sponsor for a WPT event -- WPT Japan with Sega Sammy Corporation. In September, the WPT hosted a second event with partypoker US Network that featured another record-breaking prize pool in the New Jersey market of more than $432,000 for the WPT Online Borgata Series Main Event. With the ongoing restrictions of in-person events during the quarter, we remained focused on Interactive Services and Multiplatform Content. Not only did this help recoup nearly all of the in-person revenue loss as a result of the pandemic, but we are confident our efforts here will also help strengthen the pipeline of new fans as potential attendees at our live events when the pandemic subsides. Similar to last quarter, the shift to holding events online continued to strengthen our Interactive Services pillar. In the third quarter, we saw strong growth in our proprietary offerings. We extended the Legend Series brand in tournament format to VALORANT, completing 5 online VALORANT Legend Series tournaments sponsored by Switzerland-based Home of Esports. Our community building efforts in VALORANT led us to a partnership with Riot Games on a VALORANT Ignition Series, where we launched Allied Esports Odyssey, a 6-day event featuring the top teams in Europe. The event set a company viewership record with 1.6 million live views and 1.1 million hours watched on Twitch. The success of our events in the third quarter grew our Twitch followers by 358%. We also became a member of the Esports Integrity Commission and forged strong partnerships with Esports Entertainment Group and GRID Esports that have begun to generate monetization opportunities through esports betting via the licensing of video and data rights. The Vie.gg CS:GO Legend Series ran for two weeks in September and delivered 1.7 million unique viewers across multiple platforms while driving a 400% increase in new users and a 300% increase in deposits on Esports Entertainment Group's Vie.gg platform. The event was historic for Allied Esports, its partners, and the state of New Jersey, as the New Jersey Division of Gaming Enforcement and the New Jersey Economic Development Authority announced its regulatory approval, allowing our events to be the first to offer legal esports wagering in the state. In addition to Vie.gg, the event was carried on several other sportsbook platforms, including DraftKings, PointsBet, bet365, Pinnacle, Uwin, Yabo, ONEworks, and Funbet. We also laid out our vision for continued growth of our online tournament offerings in North America, where we will be hosting combinations of month-long series and single-day pop-up events to drive participation and viewership. The VALORANT Strafe Series and Rocket League Combustion Series ran throughout the quarter with more than 1,700 players participating online. The Interactive Services pillar of the Allied Esports business continues to mature. Importantly, the platform we built to host online esports tournaments represents an important foundational building block. In the future, we expect to further develop the platform as an always-on subscription-based online service, where esports players and fans can watch, play, and win with other members of the esports community along with esports personalities and influencers. This online platform will be closely integrated with our offline experiences to create a comprehensive and authentic esports tournament experience for fans. Turning next to WPT. We demonstrated further online success during the third quarter. From July through September, WPT hosted the first-ever WPT World Online Championships on partypoker. The series was phenomenally successful with $100 million in guarantees in the festival and five WPT champions crowned and their names added to the Mike Sexton WPT Champions Cup. The $10,000 buy-in, $10 million guaranteed WPT Main Event drew more than 1,000 players and became the largest WPT prize pool of Season 18. In addition to being one of the most successful events in WPT history, this festival underscores the growing brand value of WPT Online globally. In addition to the online events, the successful World Poker Tour Interactive Services strategy includes ClubWPT, our online membership platform that offers a subscription-based poker club with no purchase necessary. Earlier in the year, ClubWPT launched its $100,000 ClubWPT Diamond Championship promotion, which has proven very popular with members. Qualifiers ran from June through October, culminating in a $100,000 prize pool event in November. This became the largest single-day tournament prize pool in ClubWPT's history, with first place taking home $25,000. We also continue to be pleased with the new premium level of ClubWPT membership, ClubWPT Diamond, which successfully launched in June. Diamond subscribers have exceeded our expectations and comprise a meaningful portion of the overall ClubWPT revenue. Thanks in part to these activities, ClubWPT can point to some impressive growth statistics through the end of Q3, including: new registrations increased 29% year-over-year; total subscription revenue increased 105% year-over-year; daily active users on average increased 41% year-over-year; and virtual currency sales in ClubWPT are up 171% compared to the prior year. Rounding out our business model pillars in Multiplatform Content, where we generated content that is livestreamed, post-produced, or packaged for consumption on a 24/7 basis and retain optionality and monetization of content via direct distribution and sponsorship, use of third-party distributors, or other various hybrid solutions. World Poker Tour has executed this successfully for many years. Overall, we continue to experience strong demand for our poker television product. During the third quarter, WPT Online sponsorship revenue from ad sales grew 23% over the prior year period, which is a promising sign as more content opportunities move online to a global audience. Moreover, WPT Studios began the process of securing syndications for Seasons 13 and 14 of the WPT television series in 2021. With a forecasted 80% clearance, this puts WPT in the position of selling national advertising buy-ins in 2021 and pushing for upfront revenue. I think it is also important to note that linear household viewership in the third quarter was up 77% year-over-year, while OTT household viewership grew 368% over the prior year period. In fact, OTT third quarter viewership of 22 million households surpassed linear television viewership of 17 million households for the first time. Before turning it over to Tony to discuss our third quarter financials in more detail, I would like to provide an update on our strategic relationship with Simon Property Group and Brookfield Property Partners, who we are working with to deliver esports experiences at select Simon and Brookfield properties. Earlier in the year, Simon's Mall of Georgia, located in the Atlanta metro area, was selected as the location for an Allied Esports venue. While the Simon project is currently suspended due to the pandemic, esports remains a key strategic initiative for Simon. To allow for this, we are talking about further extending the milestone date under our partnership agreement until the COVID-19 crisis has ended. With respect to our similar strategic relationship with Brookfield, we are following a similar path to open an on-mall venue concept at Brookfield retail location once the COVID-19 crisis has passed. Although the pandemic delays our timeline with expansion to malls, we remain confident in the prospect of this business initiative, and we'll continue to update you on our progress in future calls.

Thank you, Frank. Good afternoon, everyone, and thank you for joining us today. As Frank mentioned, our third quarter performance demonstrates the resiliency of our business and our ability to pivot our strategic focus within our three pillars amidst this dynamic and challenging operating environment. While our in-person pillar continued to be impacted by travel restrictions and social distancing protocols as a result of the pandemic, we made strides in the development of our Multiplatform Content and Interactive pillars, where we saw strong revenue growth this quarter. As we continue to leverage these two pillars while diligently working on the recovery of live in-person events, our priority remains to manage our expense base and strengthen our liquidity position while executing our strategy and positioning ourselves for long-term growth. Now turning to our third quarter results. Total revenues for the third quarter of 2020 were $5.9 million, down 2.5% year-over-year, primarily due to lower in-person revenues, which were nearly offset by higher revenues from the Multiplatform Content and Interactive Services pillars. Looking at these results in greater detail, in-person revenues for the third quarter totaled $0.7 million compared to $2.6 million in the prior year period. The decrease of 73.1% year-over-year was a result of postponed events, reduced operating hours, and social distancing measures from the pandemic. Multiplatform Content revenues totaled $1.3 million compared to $1.0 million in the prior year period, an increase of 22.6%. This growth was primarily due to an increase in distribution revenue from two major customers. Finally, Interactive Services revenues totaled $3.9 million for the third quarter compared to $2.4 million in the third quarter last year or an increase of 62.1%. The increase was primarily attributed to strong growth in ClubWPT subscription and continued success of our new premium ClubWPT Diamond service. Overall, total revenues in the third quarter of 2020 derived from Allied Esports decreased to $0.6 million from $1.9 million in the third quarter of 2019. Total revenues derived from WPT increased to $5.3 million from $4.1 million in the prior year period. While the effects from the pandemic across the globe continued to significantly impact our esports business, World Poker Tour's mature Multiplatform Content and Interactive Services pillars allowed us to still realize revenue from the transition to online services and events and generate strong year-over-year growth through the quarter. Total cost and expenses for the third quarter were $9.2 million, down 6.6% from $9.9 million in the prior year period. We significantly reduced our expenses in the in-person pillar by 46.5% or $0.6 million; selling and marketing expenses by 76.2% or $0.5 million; and G&A expenses by 23.7% or $1.1 million compared to the prior year period. The decreases reflect our priority to manage expenses during the quarter and actively reduce all nonessential spending. The year-over-year decrease in total cost and expenses was partially offset by several factors. First, expenses in the Multiplatform Content pillar increased 18% or $0.1 million to $0.9 million. Expenses in the Interactive Services pillar increased 119.5% or $0.7 million to $1.2 million compared to the third quarter of 2019, and online operating expenses increased 90.7% or $0.2 million as we continue to build out online events and production services as the recovery of live in-person events continues. Total net loss for the third quarter was $6.5 million compared to a net loss of $4.3 million in the third quarter of 2019. Total net loss for the third quarter of 2020 was negatively impacted by a non-cash extinguishment loss on acceleration of debt redemption of $1.7 million that was not incurred in the prior year period. This resulted from the acceleration of monthly payment on the senior secured convertible debt during the period. Moving to our balance sheet. At September 30, 2020, our cash position totaled $10.8 million, including $5 million of restricted cash, compared to $12.1 million at December 31, 2019, which included $3.7 million of restricted cash. The decrease in cash is primarily due to funding our operating activities and the repayment of our prior bridge notes, partially offset by new funds raised during the year. As of September 30, 2020, we had convertible debt and bridge notes totaling $3.4 million in gross principal, which matures on February 23, 2022. We also had convertible debt in the gross principal amount of $5.7 million, which is payable in monthly installments through June of 2022 and can also be accelerated at the option of the lender. In total, we reduced the outstanding principal of our convertible debt balance by $3.9 million from the prior quarter. Subsequent to the quarter end, we paid down our convertible debt principal to $3.1 million. In summary, we continue to strengthen our offerings in Multiplatform Content and Interactive Services pillars, as evidenced by the significant growth this quarter in those pillars. And the successful WPT model continues to serve as a guide for the expansion of the Allied Esports business. We remain focused on maintaining safety for our employees and customers while continuing to look for opportunities to optimize our capital, strengthen our balance sheet, and create value and growth for the future. With that, we will now open the line for Q&A.

Our first question is from Brian Kinstlinger with Alliance Global Partners.

Great. Just a couple. You mentioned on the in-person events, your capacity is at about 65%, I think, if I got that right. Can you talk about, first of all, how full the average events are? And then how has that improved, gotten worse, or stayed the same? How are the trends in October and November compared to maybe September?

I'd be happy to. Thanks, Brian, for your question. So our in-person events are limited to 65% of capacity due to social distancing based on how many computer stations we can get on the arena floor. We've seen great numbers as far as the capacity is concerned. We're filling those stations week in and week out on our event nights. And so we remain bullish that if we're able to increase the capacity when social distancing lifts, we will be able to continue to fill those seats.

Great. And then, in terms of a potential second wave of COVID, just take us through what's happening in Las Vegas, if there were issues at all. And do you see any need to make any changes in today's environment, which seems to change every month?

I'm happy to take that question as well. So Las Vegas was one of the strictest places at the early onset of the pandemic. They opened up earlier than many locations. Recently, we've seen an increase in the permitted gathering number from 50 up to 250. The general climate in Vegas is really focused on trying to bring conventions back. There's a lot of collaboration, not only with event organizers but with tech and the medical field to create a safe environment. As an operator in Vegas, having our facility there, we'll tend to benefit from some of those early waves of technology that increase the safety of gatherings. Currently, we don't see any downward pressure against that number, but we'll continue to evaluate that going forward. One of the things we've done is earn the trust of our customers who come back to us week in and week out because we provide a safe environment for people to play with as little concern as possible.

Great. Switching gears just a little bit in terms of the real gaming model, and you had that Jersey event. Can you remind us how you monetize gambling events? Are you taking a percentage of the Vie.gg revenues from the operators? Just maybe a quick description of how you'll generate revenue.

Sure. Happy to. What we do is we're licensing our data and video rights. If you think about us operating the event, within that game, we're operating a server that hosts that game. We leverage the data and video rights from our stream and gameplay and then sell that to sportsbooks around the world. We'll collect the license fee for them to ingest that information and create lines and offerings around our contracts on their platform.

So sportsbooks around the world will be able to replay events, or is that what I understand? They're not live events; they'll replay events, and on a sportsbook, you can place bets on these events?

They are absolutely live events. They're taking in a live feed from us and being able to process that to create lines and, in some cases, provide that video on their platforms as well behind a paywall.

Great. Last question from me...

Yes. Look, bear in mind, I've been asked that. This experiment is what we tried to do to create a custom-made experience for both makers so that we can create a consistency, the frequency, do a few hours block every day so that they can continue to see action on their book. I think our partners are very happy about the results so far.

Great. Last question I have. You talked about the cost reductions, yet you still burned $3 million in cash from operations, just backing off the envelope, looking at the cash flow statement. Is more being done to reduce the cash burn? Or just maybe some thoughts, high level, on what needs to be done to reduce that burn.

Sure, Brian. This is Tony. Q3 was a little bit of an anomaly in that we had some timing issues and some onetime items that were part of our normalized burn. There was some timing with regards to the tax-withholding payments made for shares issued to a number of our employees. We also had a large D&O insurance premium and a few other things like that. Those are all expected for our normal operating burn. More from a normalized perspective, we've been doing everything we can to bring those costs down, and I think we've done a very good job at that, and you should be able to see it continue going forward.

Our next question is from Derek Soderberg with Colliers Securities.

I wanted to start with the World Poker Tour business as it relates to the ClubWPT side. Can you give us any details on your expectations for the business from here? And then also, how are you guys sizing that opportunity?

Yes. This is Adam speaking. Thanks for the question. We've launched our new Diamond club, and I think we still have a lot of growth in that. I can say that when you go from $24 to $27 up to $150, it’s not so much that the margins changed because you have additional prize pools, but the absolute dollar amount changes. It gives us a lot more room to do affiliate marketing, something that the club at that level really isn't as competitive with some of the online gaming affiliate models out there. We see a great opportunity to begin affiliate marketing, something we have not done but are now able to do. In addition, as real money gaming starts to open up, social gaming is a great entry point for gamers of all locations. We're getting a lot of inquiries from real money gaming companies, not just in poker but in sportsbooks and other areas as well, who realize that this is a valuable database. These are people who have an interest in competition, online competition. At the same time, the fact that they're in the social gaming space suggests that they have yet to select a real-money gaming partner because that wasn't available in the U.S. This presents another avenue of growth.

Okay. And then within Interactive, you guys have the virtual product revenue, the Zynga, and those others. Are those businesses benefiting as well from some of the trends that we're seeing? And how are those partnerships going?

Yes. I think in general, everybody has benefited from people being home and realizing that this is entertainment, some more than others. In terms of our capital play agreement, the Play WPT side of the business, which is based on right share, I think we see benefits from that. Our relationships have been good. Part of the decisions that we have to make going forward is related to database domain. We take great pride that people want to license the WPT name, but it presents an opportunity. In the future, we might want to consolidate these things so that all of the names fall under our umbrella.

Great. And then my final question is just a broad question on the industry. I know you mentioned some nice numbers on viewership. Can you provide additional commentary on how you guys are going to monetize some of that for the online events? Viewership is clearly up. Has revenue per event, particularly online events, been trending upward? Have you seen increased engagement from new customers? Any additional details on how you guys are monetizing those trends?

Sure. It's not apples-to-apples because before, we had 65 physical events. Suddenly, we had a pandemic. Fortunately, we were prepared to test our first online event before the pandemic and accelerated that. What is very nice about the online opportunities, and we'll never go back to a world without online World Poker Tour events, is that first of all, the margins are significantly better. Secondly, the intrinsic value we bring can be replicated over thousands of people. We still have our hosts dialoguing with the winners at the final table, but now over social media instead of a stream that might reach several thousand people before the TV show goes out. We have a chance to reach many, many, many more people who have been playing or watching it. One of the aspects I want to point out is, for the first time, we saw total viewership online exceeding linear television. That's a big turning point. This is relevant in two respects. First, the World Poker Tour has one of the largest databases of quality poker content. When the world went online to streaming several years ago, we continued to do high-end television multimillion-dollar productions. We were able to make relationships with platforms like Pluto, where we could launch a channel from day one that meets the quality expected by online platforms. Those platforms are becoming competitive with linear networks. The second reason this is important is that when you're watching television and we tell you to go to ClubWPT, you're that much closer in the process of signing up. Consequently, you will see fewer barriers when watching online. Moreover, we have a massive database of some of the greatest moments in poker. Those clips can become immensely valuable. We've had inbound inquiries for them and are using those clips for ourselves. In essence, those are little viral pieces of information. You put them online, and you get thousands of people watching. We had over 500,000 views in a few days from one viral clip we put out a few weeks ago. Afterward, you can still put your same ads on those. We believe that online growth and controlling our database gives us a strong advantage.

We have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Okay. Thank you for your support and for joining us on today's call. We look forward to speaking with you again when we report our 2020 fourth quarter in March. Thank you again for your time and attention this afternoon, and please stay safe and healthy.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.