Esports Technologies, Inc. (EBET) Q2 2022 Earnings Call Transcript

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Esports Technologies, Inc. (EBET 20.00%)
Q2 2022 Earnings Call
May 10, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to eBET's second quarter 2022 earnings call. Today, eBET's CEO, Aaron Speach, and CFO, Jim Purcell, will provide an update on the quarter and what's ahead for the company.

Aaron Speach -- Founder and Chief Executive Officer

Good afternoon, everyone, and thank you for joining eBET's Q2 conference call. We are very pleased with what we've accomplished during our second quarter of 2022 as we have continued to take significant strides in achieving our goal of being the leader in e-sports wagering and technology. Our vision is to provide unique wagering experiences to millennial and Gen Z demographics in the e-sports, casino, free-to-play and crypto wagering markets. During fiscal Q2 2022 quarter ending March 31, we took significant strides toward our vision.

We successfully transitioned the assets we acquired in Q1, our acquisition integration is going better than anticipated, the performance of the assets are on target, and our key acquisition integration goals are going well. We have consolidated all of our products onto a single platform. This will allow us to be efficient as we launch multiple brands into Latin America, Europe and Asia. Key post-acquisition targets, including employee migration, are being hit or exceeded.

We are diversifying our revenue by expanding into additional Latin American markets, and we have started to rebuild our Gogawi brand in Brazil, which is one of the top e-sports markets globally. We launched our odds and modeling feed for e-sports that we believe is best-in-class in both odds and offerings. We continue to make progress to patent our technological innovations. We have submitted five patent applications in the U.S.

While these are all pending review, it is key that we obtain patent approval on our technology innovations. We launched a brand change from Esports Technologies to eBET. We feel eBET better represents the future of our company goals. Our focus is not diverting from e-sports, but due to the new acquisition and upcoming product releases, we feel eBET better represents our goals as a company, which is to provide world-class betting products to the 18- to 40-year old demographics.

And we drove $19 million in revenue with a full quarter of revenue from the acquisition. We are proud to say that we are still on pace to hit our target of $70 million. Now I'm going to hand it over to Jim to go more in depth on our Q2 financial performance. Take it away, Jim.

Jim Purcell -- Chief Financial Officer

Thank you, Aaron, and thanks to everyone for taking the time to hear our results. We are pleased with what we've accomplished this quarter and remain very optimistic about the future of our business. During the three months ended March 31, 2022, our second fiscal quarter, we recorded revenue of $19.0 million and gross margin of $7.1 million. These results are particularly impressive when you consider the strength of the U.S.

dollar, market adjustments in Germany and delays in market access to the Netherlands. The U.S. dollar has strengthened conservatively when compared to the euro British pound. As you know, our business are located in Europe, so we earn rather than the currency of the wager placed, which is primarily the euro and British pound.

During our first fiscal second quarter, the U.S. dollar was 7% stronger when compared to the same period the prior year. This trend has accelerated since quarter end. Our strong revenue growth is also impressive when considering the headwinds of the German market due to challenging regulatory conditions and other macroeconomic conditions.

Finally, our revenue performance would have been even better had we obtained market access to the Netherlands as quickly as expected. We now expect to enter the market in calendar 2023. We continue to invest in new markets to maintain a strong customer base in as many markets as possible for a stable base for future growth. This execution gives us confidence that we will achieve our stated revenue goal of $70 million in fiscal 2022 when measured on a constant currency basis.

Looking at other aspects of our business, we ended the quarter with a cash position of $7.1 million, down from $11.8 million at the prior quarter end. We continue to invest in core intellectual property for the e-sports wagering ecosystem. Our current investments remain in developing those comprehensive odds and modeling for e-sports events that will provide the best prices in the most markets. Our products are live at a limited number of test markets now, and we expect a full rollout in the high-value European markets later in the year.

Adjusted EBITDA for the quarter was a negative $4.7 million. To be clear, our adjusted EBITDA is calculated by starting with our loss from operations of $9.1 million and adding back noncash compensation costs of $1.8 million and depreciation and amortization of $2.6 million. During Q2 2022, we used $4.6 million of cash for operations. We expect to continue to invest in new e-sports products and expand the geographical reach of our iGaming, sportsbook and e-sports businesses throughout fiscal 2022.

With that, I'll hand the meeting back over to Aaron.

Aaron Speach -- Founder and Chief Executive Officer

Thank you, Jim. And thank you all for joining us on today's eBET conference call. Have a good night. Bye.

Duration: 6 minutes

Call participants:

Aaron Speach -- Founder and Chief Executive Officer

Jim Purcell -- Chief Financial Officer

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