What happened

Shares of Enthusiast Gaming Holdings (EGLX 6.16%) were up 14.3% as of 11:02 a.m. ET on Tuesday after delivering first-quarter earnings results on Monday. 

The company reported increased content viewership across its gaming communities and platforms. Revenue increased by 57% year over year, driven by strong monetization trends across its online properties, higher direct sales, subscriptions, and the acquisitions of the Addicting Games and U.GG properties. This is a strong start to the year for what is usually a seasonally slow quarter. 

So what

Enthusiast Gaming is on a mission to build the largest media platform for video game and e-sports fans, and the latest operating results demonstrates good progress. The company has built an audience of 300 million people a month spread across 100 websites and channels on social media platforms. The next phase of management's strategy is to monetize those viewers through subscriptions and advertising.

The company finished the quarter with 233,000 paying subscribers, up from 207,000 reported in January. That is fueling improvement in profitability.

Gross profit grew more than twice as fast as revenue in the first quarter. The company still reported a net loss of 11 million Canadian dollars ($8.5 million) on CA$47 million of revenue, but that's an improvement over the CA$13.5 million loss in the year-ago quarter.

An esports team competing at an gaming event.

Image source: Getty Images.

Now what

CEO Adrian Montgomery said the business is off to a strong start to the year and should continue to drive rapid growth: "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 line growth, while increasing gross profit at a significantly faster rate."

A key part of the investment thesis is not only growth in the video game industry and e-sports, but also expanding margins. The company's gross margin came in at 28.6% in the quarter, but management sees a path toward 50% over the long term. After gross margin improved by nearly 9 percentage points year over year, it is heading in that direction.