6-K
Enthusiast Gaming Holdings Inc. / Canada (EGLXF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
Pursuant
to Rule 13a-16 or 15d-16
Under
the Securities Exchange Act of 1934
For the month
of May 2022 Commission File Number: 001-40331
Enthusiast Gaming Holdings Inc. / Canada
(Exact name of registrant as specified in its charter)
90 Eglinton Avenue East, Suite 805, Toronto, ON, M4P 2Y3
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
EXHIBIT INDEX
| Exhibit No: | Description |
|---|---|
| 99.1 | Press Release, dated May 16, 2022. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ENTHUSIAST GAMING HOLDINGS INC. | |
|---|---|
| BY: | /s/ Alex Macdonald |
| ALEX MACDONALD | |
| Date: May 16, 2022 | CHIEF FINANCIAL OFFICER |
Exhibit 99.1
Enthusiast Gaming Announces First Quarter 2022 Results
Revenue of $47.2 million, up 57%
Gross profit $13.5 million, up 127%
Gross margin of 28.6%, up 880 bps
LOS ANGELES, May 16, 2022 -- Enthusiast Gaming Holdings Inc. (“Enthusiast Gaming” or the “Company”) (NASDAQ:EGLX; TSX:EGLX), an integrated gaming entertainment company, today announced financial results for the three months ended March 31, 2022 (“Q1 2022”).
“2022is off to a very strong start, led by accelerated revenue growth and substantial margin expansion. Q1 2022 gross profit was particularlystrong and effectively equal to Q4 2021 gross profit, despite a strong seasonal difference between the two periods,” commented Adrian Montgomery, CEO of Enthusiast Gaming. “Our flywheel model, centered around communities, content,creators, and experiences, continues to drive increasing value. Our team is well positioned to continue delivering rapid top linegrowth, while increasing gross profit at a significantly faster rate. Further, to be able to accelerate revenue growth in a quarterthat is seasonally the slowest is a strong sign for the balance of the year. We are confident these trends will continue as wefocus on meeting profitability objectives in the short term.”
Q1 2022 Financial Highlights
| • | Revenue<br> of $47.2 million, a 57% increase vs revenue of $30.0 million in Q1 2021. The year-over-year<br> increase in revenue was driven by increased content viewership, stronger RPMs across<br> both web and video, higher direct sales, higher subscription revenue, and the acquisitions<br> and growth of the Addicting Games and U.GG properties. |
|---|---|
| • | Gross<br> profit of $13.5 million, a 127% increase vs gross profit of $5.9 million in Q1 2021 and<br> effectively equal to Q4 2021 gross profit of $13.7 million, despite a strong seasonal<br> difference between the two periods. |
| --- | --- |
| • | Gross<br> margin of 28.6%, an increase of 880 bps vs gross margin of 19.8% in Q1 2021. The increase<br> in gross margin is driven by the strong performance of Addicting Games and U.GG, as well<br> as the higher direct sales and subscription revenue. |
| --- | --- |
| • | Direct<br> sales of $5.2 million, a 136% increase vs direct sales of $2.2 million in Q1 2021. Renewals<br> and additional business with existing customers accounted for 65% of direct sales. Direct<br> sales are included in revenue. |
| --- | --- |
| • | Subscription<br> revenue of $3.3 million, an 83% increase vs subscription revenue of $1.8 million in Q1<br> 2021. The increase in subscription revenue was driven by an increase in paid subscribers.<br> Paid subscribers were 233,000 as at March 31, 2022, a 70% increase vs paid subscribers<br> of 137,000 as at March 31, 2021. |
| --- | --- |
Q1 2022 Operational Highlights
| • | The<br> Company’s audience consumed 11.3 billion views of content across the web and video<br> platforms, a 14% increase vs 9.9 billion in Q1 2021. |
|---|---|
| • | Renewals<br> or additional business with key partners including ExitLag, US Navy, HBO Max, Truth Initiative,<br> DoorDash, e.l.f<br>Cosmetics, H&R Block. |
| --- | --- |
| • | Luminosity<br> Gaming’s total social following reached 145 million globally in January 2022, having<br> grown 13% since the last study in October 2021. In addition, the hours watched for Luminosity<br> Gaming’s esports teams on Twitch surpassed 32 million globally in January, an increase<br> of 34% since the last study, according to a Nielsen study. |
| --- | --- |
| • | Launched<br> a partnership with Fractal, an NFT marketplace co-founded by Justin Kan, co-founder of<br> Twitch. The partnership marks Enthusiast Gaming’s first with an NFT marketplace,<br> and will see NFTs integrated into one of the Company’s HTML5-based games, EV.IO. |
| --- | --- |
| • | Ranked<br> as the largest property in the Games category in the United Kingdom and Canada, based<br> on digital media ratings from Comscore. |
| --- | --- |
Organizational Update
The Company would also like to announce that Menashe Kestenbaum has left the Company’s Board of Directors. The Company thanks Menashe for his service and wishes him success in his future endeavors.
Earnings Announcement and Supplemental Information
Management will host a conference call and webcast on May 16, 2022, at 5:00 p.m. Eastern Time to review and discuss the first quarter 2022 results.
Please call the following numbers to participate:
North America (toll-free): 1-855-327-6837
International: 1-631-891-4304
Conference ID: 10019138
A live webcast can be heard at https://www.enthusiastgaming.com/shareholder-information/. If you are unable to join live, an archived recording of the webcast will be available on the Investor Relations page of the Enthusiast Gaming website.
Certain information provided in this news release is extracted from financial statements and management’s discussion & analysis (“MD&A”) of the Company for the three months ended March 31, 2022, and should be read in conjunction with them. It is only in the context of the fulsome information and disclosures contained in the financial statements and MD&A that an investor can properly analyze this information. The financial statements and MD&A have been published on the Company’s profile on SEDAR and EDGAR.
All amounts are in Canadian dollars.
About Enthusiast Gaming
Enthusiast Gaming is an integrated gaming entertainment company, building the largest media and content platform for video game and esports fans to connect and engage worldwide. Combining the elements of its four core pillars: Communities, Content, Creators, and Experiences, Enthusiast Gaming provides a unique opportunity and integrated approach to reach and connect with its coveted GenZ and Millennial audience. Through its proprietary mix of digital media and entertainment assets, Enthusiast Gaming has built a vast network of like-minded communities to deliver the ultimate fan experience.
Contacts
Enthusiast Gaming Investor Relations:
Eric Bernofsky, Chief Corporate Officer
investor@enthusiastgaming.com
Media Relations:
Derek Holota, Provident Communications
Derek@providentcomms.com
343-422-5606
Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
This news release contains certain statements that may constitute forward-looking information under applicable securities laws. All statements, other than those of historical fact, which address activities, events, outcomes, results, developments, performance or achievements that Enthusiast Gaming anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results “may”, “could”, “would”, “might” or “will” (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking statements in this news release include, but are not limited to, statements regarding trends in certain financial and operating metrics of the Company, and expectations relating to the financial performance and the financial results of future periods.
Forward-looking statements are based on assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, including, but not limited to, expectations and assumptions concerning: interest and foreign exchange rates; capital efficiencies, cost saving and synergies; growth and growth rates; the success in the esports and gaming media industry; the Company’s growth plan, and judgment applied in the application of the Company’s accounting policies and in the preparation of financial statements in accordance with applicable financial reporting standards. While Enthusiast Gaming considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; and future legislative, tax and regulatory developments. Readers are cautioned that the foregoing list is not exhaustive. For more information on the risks, uncertainties and assumptions that could cause anticipated opportunities and actual results to differ materially, please refer to the public filings of Enthusiast Gaming which are available on SEDAR at www.sedar.com. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement and reflect our expectations as of the date hereof, and thus are subject to change thereafter. Enthusiast Gaming disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Enthusiast Gaming Holdings Inc.
CondensedConsolidated Interim Statements of Financial Position
Asof March 31, 2022 and December 31, 2021
(Unaudited
- Expressed in Canadian Dollars)
| March 31, | December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | 14,138,029 | $ | 22,654,262 | ||
| Trade and other receivables | 29,616,959 | 33,801,990 | ||||
| Investments | 131,252 | 131,342 | ||||
| Loans receivable | 50,935 | 176,931 | ||||
| Income tax receivable | 399,509 | 356,366 | ||||
| Prepaid expenses | 1,355,642 | 2,145,184 | ||||
| Total current assets | 45,692,326 | 59,266,075 | ||||
| Non-current | ||||||
| Property and equipment | 223,063 | 247,988 | ||||
| Right-of-use assets | 2,601,612 | 2,885,662 | ||||
| Investment in associates and joint ventures | 1,181,310 | 885,269 | ||||
| Long-term portion of prepaid expenses | 258,162 | 261,922 | ||||
| Intangible assets | 123,975,000 | 129,138,595 | ||||
| Goodwill | 193,942,515 | 195,097,659 | ||||
| Total assets | $ | 367,873,988 | $ | 387,783,170 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 27,032,387 | $ | 34,391,221 | ||
| Contract liabilities | 3,867,901 | 3,890,569 | ||||
| Income tax payable | 193,701 | 114,094 | ||||
| Current portion of long-term debt | 2,000,000 | 2,000,000 | ||||
| Current portion of deferred payment liability | 26,702,412 | 27,244,146 | ||||
| Current portion of lease contract liabilities | 771,736 | 796,835 | ||||
| Current portion of other long-term debt | 10,961 | 11,121 | ||||
| Total current liabilities | 60,579,098 | 68,447,986 | ||||
| Non-current | ||||||
| Long-term debt | 7,226,838 | 7,681,867 | ||||
| Long-term portion of deferred payment liability | 20,084,613 | 20,794,275 | ||||
| Long-term lease contract liabilities | 1,979,741 | 2,213,512 | ||||
| Other long-term debt | 134,154 | 136,324 | ||||
| Deferred tax liability | 25,070,291 | 25,740,885 | ||||
| Total liabilities | $ | 115,074,735 | $ | 125,014,849 | ||
| Shareholders' Equity | ||||||
| Share capital | 388,213,957 | 387,087,948 | ||||
| Contributed surplus | 26,631,643 | 25,485,361 | ||||
| Accumulated other comprehensive income (loss) | (681,264 | ) | 527,166 | |||
| Deficit | (161,365,083 | ) | (150,332,154 | ) | ||
| Total shareholders' equity | 252,799,253 | 262,768,321 | ||||
| Total liabilities and shareholders' equity | $ | 367,873,988 | $ | 387,783,170 |
Enthusiast Gaming Holdings Inc.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
For the three months ended March 31, 2022 and 2021
(Unaudited
- Expressed in Canadian Dollars)
| March 31, 2022 | March 31, 2021 | |||||
|---|---|---|---|---|---|---|
| Revenue | $ | 47,167,538 | $ | 30,022,335 | ||
| Cost of sales | 33,676,159 | 24,091,327 | ||||
| Gross margin | 13,491,379 | 5,931,008 | ||||
| Operating expenses | ||||||
| Professional fees | 924,821 | 737,496 | ||||
| Consulting fees | 1,478,174 | 1,310,627 | ||||
| Advertising and promotion | 327,447 | 1,042,354 | ||||
| Office and general | 2,262,905 | 706,945 | ||||
| Salaries and wages | 8,696,875 | 4,628,275 | ||||
| Technology support, web development and content | 3,458,868 | 1,394,883 | ||||
| Esports player, team and game expenses | 1,511,488 | 1,528,605 | ||||
| Foreign exchange loss (gain) | 8,587 | (10,133 | ) | |||
| Share-based compensation | 1,386,181 | 5,760,036 | ||||
| Amortization and depreciation | 4,767,024 | 1,635,854 | ||||
| Total operating expenses | 24,822,370 | 18,734,942 | ||||
| Other expenses (income) | ||||||
| Share of (income) loss from investment in associates and joint ventures | (296,041 | ) | 78,418 | |||
| Interest and accretion | 1,430,669 | 791,314 | ||||
| Interest income | (1,401 | ) | (18,320 | ) | ||
| Gain on revaluation of deferred payment liability | (1,015,538 | ) | - | |||
| Gain on repayment of long-term debt | - | (39,502 | ) | |||
| Change in fair value of investment | - | (3,984 | ) | |||
| Net loss before income taxes | (11,448,680 | ) | (13,611,860 | ) | ||
| Income taxes | ||||||
| Current tax expense (recovery) | 110,529 | (14,655 | ) | |||
| Deferred tax recovery | (526,280 | ) | (79,779 | ) | ||
| Net loss for the period | (11,032,929 | ) | (13,517,426 | ) | ||
| Other comprehensive income (loss) | ||||||
| Items that may be reclassified to profit or loss<br> Foreign currency translation adjustment | (1,208,430 | ) | (47,702 | ) | ||
| Net loss and comprehensive loss for the period | $ | (12,241,359 | ) | $ | (13,565,128 | ) |
| Net loss loss per share, basic and diluted | $ | (0.08 | ) | $ | (0.12 | ) |
| Weighted<br> average number of common shares outstanding, basic and diluted | 133,605,479 | 111,462,147 |
Enthusiast Gaming Holdings Inc.
CondensedConsolidated Interim Statements of Cash Flows
For the three months ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars)
| March<br> 31, 2022 | March<br> 31, 2021 | |||||
|---|---|---|---|---|---|---|
| Cash<br> flows from operating activities | ||||||
| Net loss<br> for the period | $ | (11,032,929 | ) | $ | (13,517,426 | ) |
| Items not affecting<br> cash: | ||||||
| Amortization and depreciation | 4,767,024 | 1,635,854 | ||||
| Share-based compensation | 1,386,181 | 5,760,036 | ||||
| Interest and accretion | 1,227,561 | 274,083 | ||||
| Deferred tax recovery | (526,280 | ) | (79,779 | ) | ||
| Foreign exchange (gain)<br> loss | 13,458 | (696 | ) | |||
| Gain on repayment of<br> long-term debt | - | (39,502 | ) | |||
| Gain on revaluation<br> of deferred payment liability | (1,015,538 | ) | - | |||
| Shares for services | 63,320 | 93,553 | ||||
| Change in fair value<br> of investment | - | (3,984 | ) | |||
| Share of (income) loss<br> from investment in associates and joint ventures | (296,041 | ) | 78,418 | |||
| Changes in working capital: | ||||||
| Changes in trade and<br> other receivables | 4,185,031 | 4,300,825 | ||||
| Changes in prepaid expenses | 789,542 | (5,623 | ) | |||
| Changes in loans receivable | 125,995 | 12,500 | ||||
| Changes in accounts<br> payable and accrued liabilities | (7,236,523 | ) | (6,035,820 | ) | ||
| Changes in contract<br> liabilities | (22,668 | ) | 239,881 | |||
| Changes in income tax | 107,480 | - | ||||
| Income tax paid | (71,016 | ) | - | |||
| Net<br> cash used in operating activities | (7,535,403 | ) | (7,287,680 | ) | ||
| Cash<br> flows from investing activities | ||||||
| Acquisition of property<br> and equipment | (1,757 | ) | (3,398 | ) | ||
| Net<br> cash used in investing activities | (1,757 | ) | (3,398 | ) | ||
| Cash<br> flows from financing activities | ||||||
| Proceeds from the<br> issuance of shares for Offering, net of transaction costs | - | 39,862,514 | ||||
| Proceeds from long-term<br> debt, net of transaction costs | - | 944,787 | ||||
| Repayment of long-term<br> debt | (500,000 | ) | (13,773,470 | ) | ||
| Proceeds from exercise of options | 69,820 | 594,836 | ||||
| Repayment of other long-term<br> debt | (2,741 | ) | - | |||
| Lease payments | (240,001 | ) | (236,614 | ) | ||
| Net<br> cash (used in) provided by financing activities | (672,922 | ) | 27,392,053 | |||
| Foreign exchange effect<br> on cash | (306,151 | ) | (24,502 | ) | ||
| Net change in cash | (8,516,233 | ) | 20,076,473 | |||
| Cash, beginning of period | 22,654,262 | 4,323,823 | ||||
| Cash, end of period | $ | 14,138,029 | $ | 24,400,296 |