Esports Technologies, Inc. (EBET) Q1 2022 Earnings Call Transcript

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Esports Technologies, Inc. (EBET 3.91%)
Q1 2022 Earnings Call
Feb 09, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Esports Technologies first quarter 2022 earnings conference call. [Operator instructions] During the course of this call, statements made that are not statements of historical fact cuts to forward-looking statements that are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those contemplated in these forward-looking statements. Forward-looking statements are based on management's current assumptions, expectations of future events and trends which may affect Esports Technologies, business strategy, operations, or financial performance.

Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of today's date. For more information, please refer to the risks and uncertainties and other factors discussed Esports Technologies, SEC filings, particularly its Form 10-K for the year ended September 30th, 2021. All cautionary statements that we make during this call are applicable to any forward-looking statements that we make whenever they appear. You should carefully consider the risks, uncertainties and other factors discussed in these Esports Technologies SEC filings.

Esports Technologies undertakes no obligation to update any estimate production projections or forward-looking statements. Please note that this conference is being recorded. I will now turn the conference over to Aaron Speach, founder and CEO. Thank you.

You may begin.

Aaron Speach -- Founder and Chief Executive Officer

Good morning, everyone, and welcome. We are very pleased with what we havE accomplished during our first quarter of 2022, as we have taken significant strides in achieving our goal of being the leader in Esports wagering and technology. Our vision is to provide unique wagering experiences to the $550 million underserved e-sports fans from around the world. During Q1 2022, we took significant strides toward our vision.

We completed a transformative acquisition of five online casino and sportsbook brands with $1.25 million deposited customers, with a majority of them under the age of 35. Of the top 15 wagering markets, Europe has 12. With this acquisition, we now have market access to many of these European markets. Access to tier one regulated markets, including the United Kingdom, Germany, Ireland, and Denmark.

Our future Esports products will have audience of over $200 million people in the European markets. Our acquisition integration is going better than anticipated. The performance of the assets are on target, and our key acquisition integration goals are doing extremely well. We have consolidated all of our products onto a single platform.

This will allow us to be efficient as we launch go [Inaudible] into Asia, Latin America, and CIS countries. Key post acquisition targets, including employee migration, are being hit and or exceeded. We are diversifying our revenue by expanding into Latin America and Asia, along with the European business that we just acquired. We are on track to launch our Esports products in calendar 2022.

Including Esports book, which will be a regulated sports betting product with a focus on Esports throughout Europe and other regulated markets that we have access to and browser-bets, which is our unique browser extension that will allow a consumer to bet directly in the video stream that they are watching. We're excited that both of those products are on track for Q2 of this calendar year. We continue to make progress to patent our technologies and innovations. We've submitted five patent applications in the U.S.

over the last 12 months, while these are all pending review. It is a key that we obtain patent approval on our technology innovations. We recently just opened our offices in Malta, and are happy to say that all of the employees from the acquired brand were successfully moved in. We drove $7.1 million in revenue, with most of that coming in December from the newly acquired brands.

An increase cash position to $11.8 million up $2.8 million from the year end. We were very excited to release a 10-month projected earnings of $70 million for fiscal year ending September 30th. And with that, I'll hand it over to Jim. 

Jim Purcell -- Chief Financial Officer

Thank you, Aaron, and good morning, everyone. I just want to remind everyone, the discussion of our results for Q1 2022 will be relatively brief as our results only include one month of activity of the recent acquisition. Which was only completed at the end of November. Given the transformational aspect of this acquisition, comparison to the prior periods are not particularly meaningful, given the size and scale.

That will only be talking about the current quarter results. I feel we now have a business of scale, which would be a platform to leverage our future future growth. To reiterate what Aaron said, we are pleased to announce that our Q1 2022, we generated $7.1 million in revenue and over $2.5 million gross margin for the quarter. Well, substantially all of its revenue with the recent acquisition, we will be continuing to build and develop our Esports product,  and extend the reach.

We're also happy with our post-acquisition results as we're operating the business to what we expected and within plan. This execution gives us confidence that we'll achieve our stated goal of $70 million for fiscal 2022. And again, to remind everyone, our fiscal year in September 30, 2022, so that will include only 10 months of our post-acquisition activity. Looking at other aspects of our business, we ended the quarter with $11.8 million cash up $2.7 million from the year ended September 30, 2021.

We continue to invest in the growth of our business. Adjusted EBITDA for the quarter was negative $3.9 million. Our adjusted EBITDA is calculated by starting with our loss on operations of $7.8 million and adjusting for acquisition costs of 2.2 million. Non-cash stock compensation costs of $1.4 million, and depreciation and amortization of approximately $300,000.

Our net cash used in operating activities was $3 million. We expect to continue to invest in our Esports business and products as we expand the geographical reach of our iGaming sportsbook and Esports business throughout fiscal 2022. During Q4, we completed the finance of our acquisition, which raised over $67.7 million. This was used to pay the acquisition price of 50 million euro, as well as the acquisition costs.

We've taken significant strides in this current quarter. And with that, I headed back over there.

Aaron Speach -- Founder and Chief Executive Officer

Thank you, Jim, and thank you all for tuning in. I'd like to now open it up to the analyst for Q&A. Operator.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Chris Pierce with Needham and Co. Please proceed.

Chris Pierce -- Needham and Company

Hey, good morning. One clarification question. Just in the press release, you mentioned that single platform. Can just kind of go a little deeper and what you mean there? Because I know there was a number of brands in the acquisition that now Gogawi apart from you guys had prior.

Is that when you say single platform, is that's something internally on your end that's not on the customer facing side? That's a migration that you did can just kind of clarify that first? 

Aaron Speach -- Founder and Chief Executive Officer

Yeah. Absolutely. What that means is we actually moved our more original brand Gogawi from a previous provider onto the Aspire VTO bet brand. So that way that we have all of our brands under one platform provider, the reason why we did this is it creates huge operational benefits to having the same CRM systems under one roof.

And it's extremely useful for us on the loyalty side to keep everything sync-up through all of the brands that we acquired, plus Gogawi, plus the new brands that we plan on launch in 2022.

Chris Pierce -- Needham and Company

Got it perfect. And then just thinking about the business, you acquired the trailing 12-month revenue and then the preannouncement, the liberation tonight looks like a higher monthly run rate. Can you kind of talk to short-term, how'd able to drive those revenues higher and then what you're thinking on the medium and longer term as well? 

Aaron Speach -- Founder and Chief Executive Officer

Yeah. Absolutely. So one of the main reasons why Aspire felt that they wanted to sell the brands is because they weren't giving them the attention that they deserved. Now that the brands are in dedicated resources that are putting their full force and attention into those [Inaudible] products, we're able to optimize a lot of the marketing efforts and tailor a lot of the affiliate deals.

So that way we can drive revenue. And not to say that a Aspire isn't doing a good job before, the products were growing, healthy assets, and that's the reason why we purchase them. But we always felt that we were going to be able to improve upon what Aspire built originally.

Chris Pierce -- Needham and Company

Got it. And then, so that's the iGaming legacy piece of the business. Can you talk about how you can hope to penetrate these customers with these sports? And that's it for me.

Aaron Speach -- Founder and Chief Executive Officer

Yes. So first, for a wagering platform, it's always better to have a younger customer base. This is because you have a far longer consumer lifespan, and there are far cheaper to acquire. Sports wagering customers are very loyal to their platforms when you treat them well.

So once you have a product they love, to turn on a sports wagering product can be extremely low with a great loyalty program. And even more important than that, it has been found in a recent study out of the UK that Gen-Z and millennials are four point three times more likely to wager on Esports and four point five times more likely to bet on iGaming in casino product. And the demand for e-sports, the entertainment product, and betting offering is also anticipated to rise as 37% of UK adults said they expect to watch e-sports in the future, more than twice the current 15% who do so now. This is according to a survey of 20,000 adults across 16 markets in the UK.

Keep in mind, there are already $550 million fans of new sports globally, and we are here to build products for that audience by developing odds and modeling that is fair to the consumer. A modern UIUX that gives them a site they are comfortable with, and technology that allows them to that where they watch the sports they love.

Chris Pierce -- Needham and Company

Got it. And then just I guess one more clarification about something. You talked about calendar 2022, the two new products to each Esports book in Europe and the browser-bets. Esports book, that's the odds tightening the technology of investment to drive a lower odds for consumers is that am I thinking about that correctly?

Aaron Speach -- Founder and Chief Executive Officer

No, actually, the odds modeling product is going to be launched in the first quarter of this year, and we hope to have that out very quickly. Esports book is actually a full scale sports book dedicated to Esports consumers, but people that also want to play on traditional sports book as well, focused toward Gen-Z and millennials, but were able to launch that product through regulated markets like the UK and Germany, whereas Gogawi is more focused on countries like the Philippines, Brazil, and Thailand.

Chris Pierce -- Needham and Company

Perfect. Thanks for clarifying. Appreciate the questions. Good luck.

Operator

Thank you, Chris. There are no further questions from analysts. I will now turn the call over to management for closing remarks.

Aaron Speach -- Founder and Chief Executive Officer

That's all, thank you for everybody who could join today. We were really excited to share these results with you, and we look forward to talking to you guys next quarter. Thank you, everybody. 

Operator

[Operator signoff]

Duration: 14 minutes

Call participants:

Aaron Speach -- Founder and Chief Executive Officer

Jim Purcell -- Chief Financial Officer

Chris Pierce -- Needham and Company

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