Allied Gaming & Entertainment Inc. (NASDAQ:AGAE) Q3 2023 Earnings Call Transcript

Allied Gaming & Entertainment Inc. (NASDAQ:AGAE) Q3 2023 Earnings Call Transcript November 10, 2023

Operator: Good afternoon, and welcome to the Allied Gaming & Entertainment, Inc. Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tyler Drew of Addo Investor Relations. Please go ahead.

Tyler Drew: Thank you, operator. Good afternoon, and welcome to the Allied Gaming & Entertainment 2023 Third Quarter Earnings Conference Call. Speaking on the call today are Allied Gaming & Entertainment’s Chief Executive Officer Yinghua Chen and Chief Financial Officer, Roy Anderson. Before I turn the call over to management, please note that our prepared remarks 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 be identified as 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 its 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 definitions of such non-GAAP financial measures, reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

An interior shot of a gaming operators facility, gaming machines reflecting the lights.

And with that, it is now my pleasure to turn the call over to Allied Gaming & Entertainment CEO, Yinghua Chen.

Yinghua Chen: Thank you, Tyler, and thank you all for joining us this afternoon. As we share our exciting development from the past quarter, we’re committed to executing our strategic plan to focus on our growth in the realms of e-sports, gaming and entertainment. Beginning with our financial performance in Q3, we’ve achieved a significant milestone by recording positive net income. This accomplishment reflects our relentless effort to enhance operational efficiency and reduce expenses in anticipation of robust revenue growth in 2024. Our unwavering commitment to improving profitability remains steadfast despite the challenges we faced in Q3, particularly in the form of a 28% decrease in revenues, largely due to decrease of life events, reflecting the impact of economic uncertainty.

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Q&A Session

Our dedication to streamlining our general and administrative expenses resulted in a remarkable reduction of over 50% in Q3. This accomplishment not only improved our net income, but also bolstered our adjusted EBITDA results, setting us on a path to manage and grow our business at this lower expense levels. During the quarter, our subsidiary, Allied Esports International, AEI, provided its audiences with more world-class experiences at both its HyperX Arena and Omen Mobile Arena. We produced a total of 79 event days during Q3, comprising 44 proprietary event days and 35 third-party event days. Notable events at HyperX Arena included Boxing Weekend Reception, a dynamic and fun gaming event honoring boxing legends, such as Mike Tyson and Evander Holyfield; a Red Bull and Riot Games event showcasing brand-new game plays from Riot’s upcoming title Project L, for the first time during the most attended Evolution Championship Series 2023 tournaments in the history?

Hacker1, a 5-day hackathon event and an industry event by Cox Communications to discuss their leading connectivity capability. In September, we also hosted the UNLV Hockey Annual Giving Day, a fundraising event in partnership with UNLV utilizing our Omen Mobile Arena, forging a stronger connection with our local community. Our Omen Mobile Arena was also active during the quarter with events, including the NHL Draft and 3 UNLV college football games at Allegiant Stadium in Paradise, Nevada. In recognition of our contribution, we’re deeply honored that the Clark County Commission officially declared October 14 as Allied Esports Day in Clark County. We’re excited about the awareness this brings and look forward to providing even more memorable experiences to our audiences.

Turning to our partnership with HyperX. Recently, we rolled out a new set of HP Omen PCs and monitors to retrofit and update the gaming zones within the HyperX Arena. The Arena, which is considered the world’s most recognized venue and production facility for eSports is entirely outfitted with state-of-the-art equipment. In conjunction with in-person live events, we’re currently in production on our original content series WANNABE Season 2, which will be available on the YES app. After generating strong viewership numbers during season 1, we expect to release season 2 in the spring. We’re focused on incorporating more of the most well-known New York Yankees players together with top ranking pro gamers into the show to increase its reach. Furthermore, we’re actively engaging with potential partners to create new and engaging content series for our viewers, similar to one of the ELEVATED SHOW.

Stay tuned for more details as these partnerships evolve. Let’s turn to our Allied Mobile Entertainment subsidiary, or AME, which is dedicated to exploring opportunities in the massive and growing mobile games market. Subsequent to the end of the quarter, on October 31, 2023, we closed on the previously announced strategic investment in Beijing Lianzhong Zhihe Technology Co. or Zhihe, prominent mobile games developer and operator. We are delighted to finalize this strategic investment, establishing AGAE as the majority shareholder in Zhihe, while also assuming a controlling interest in the Board. This move reinforces our presence in the highly lucrative mobile games market and strengthens our position to grow within the global games industry.

Zhihe has demonstrated impressive results in just 18 months in operation, and we expect this investment will be immediately accretive to our top and bottom line while bringing valuable digital IP into the Allied ecosystem. We also continue to make progress within our Allied Experiential Entertainment subsidiary, or AEE, which focuses on organizing general entertainment live events, experiential entertainment venue operation management and consultation. We’re actively exploring opportunities to co-organized partner events in Macau. Recently, Macau has made a substantive effort to diversify its economy and generate more non-gambling revenue in the area. As such, casino operators have pledged billions of dollars in investment over the next decade.

We plan to use our event and content expertise to assist some of the casino operators in providing more nongaming entertainment options to their customers and expanding the revenue stream in a similar manner to Las Vegas. As discussions are finalized, we will update the market with additional details. We also continue to believe our stock is undervalued and have now repurchased approximately $2.7 million of AGAE stock between the announcement of the plan in November 2022 and the end of Q3. And with that, I’d like to turn the call now to our CFO, Roy Anderson, to provide updates on our Q3 financials.