Allied Gaming & Entertainment Inc. (AGAE) reported a significant increase in revenue for the third quarter of 2024, with a 93% growth compared to the same period last year. The company's Chief Executive Officer, Yinghua Chen, and Chief Financial Officer, Roy Anderson, shared these results and discussed strategic initiatives during the earnings call. Despite the revenue growth, the company experienced a net loss due to various factors, including a settlement loss and unrealized foreign currency transaction losses.
Key Takeaways
- Allied Gaming & Entertainment reported a 93% revenue increase in Q3 2024.
- The company launched the World Mahjong Tour and hosted numerous events at HyperX Arena.
- Allied Gaming's mobile arena had its busiest quarter since 2023.
- A substantial investment was received from Yellow (OTC:YELLQ) River Global Capital.
- Despite revenue growth, the company faced a net loss of $4.0 million for the quarter.
- The adjusted EBITDA loss improved compared to the previous year's quarter.
Company Outlook
- Allied Gaming & Entertainment is focusing on the World Mahjong Tour and new mobile game titles.
- The company anticipates demand growth for the HyperX arena and Omen Mobile Arena.
Bearish Highlights
- The net loss of $4.0 million included a $3 million loss from a settlement and a $1.2 million net unrealized loss on foreign currency transactions.
- The adjusted EBITDA loss, though improved, remained at $0.1 million.
Bullish Highlights
- The company's strategic investment in Z-Tech is gaining traction, expanding the gaming portfolio.
- The investment from Yellow River Global Capital includes strategic resources and networking opportunities.
Misses
- The company's net loss for the quarter was significantly higher than the net income from Q3 2023.
Q&A Highlights
- The Q&A session provided no additional details as the summary did not include any questions or answers from the conference call.
In conclusion, Allied Gaming & Entertainment Inc. is experiencing solid revenue growth and is advancing strategic initiatives, such as the World Mahjong Tour and the expansion of its mobile gaming portfolio. However, the company has faced a setback with a significant net loss this quarter, although they have seen improvements in their adjusted EBITDA losses. With the backing of Yellow River Global Capital and ongoing developments, Allied Gaming remains optimistic about its future prospects.
InvestingPro Insights
Allied Gaming & Entertainment Inc. (AGAE) has shown a mixed financial picture, which is reflected in both the company's recent earnings report and additional data from InvestingPro. While the company reported a 93% revenue increase in Q3 2024, InvestingPro data reveals that AGAE's revenue for the last twelve months as of Q2 2024 stood at $8.21 million, with a growth rate of 13.37%. This suggests that the recent quarter's performance was particularly strong compared to the overall trend.
Despite the revenue growth, AGAE faces profitability challenges. An InvestingPro Tip indicates that the company is "not profitable over the last twelve months," which aligns with the reported net loss of $4.0 million in the recent quarter. This is further supported by the negative P/E ratio of -7.62 for the last twelve months as of Q2 2024, indicating ongoing losses.
Another InvestingPro Tip highlights that AGAE is "quickly burning through cash," which could be a concern given the reported net losses. However, it's worth noting that the company "holds more cash than debt on its balance sheet," potentially providing some financial flexibility as it pursues growth initiatives like the World Mahjong Tour and mobile gaming expansion.
Investors considering AGAE should be aware that InvestingPro offers 7 additional tips for this stock, providing a more comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given the company's current growth trajectory and profitability challenges.
Full transcript - Allied Esports Entertainment Inc (NASDAQ:AGAE) Q3 2024:
Operator: Greetings and welcome to the Allied Gaming & Entertainment Inc. Third quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tyler Drew within Investor Relations. Thank you. You may begin.
Tyler Drew: Thank you, Operator. Good afternoon and welcome to the Allied Gaming & Entertainment third quarter 2024 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 identify 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 statement, 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. And with that, it is now my pleasure to turn the call over to Allied Gaming & Entertainment CEO, Yinghua Chen. Yinghua?
Yinghua Chen: Thank you Tyler. And thank you all for joining us this afternoon. It was a strong quarter for us both operationally and financially as we achieved 93% revenue growth and continue to push our strategic initiatives forward, including the launch of World Mahjong Tour which we believe will accelerate our growth. Our world-class HyperX Arena was in high demand throughout the third quarter hosting 61 event days, 34 of which were third party events. Highlights include our multi-year returning HackerOne Live Hacking Event where top hackers from around the globe collaborated to strengthen organizational security. We also hosted Global Gaming League's inaugural event, Everybody Games, a private gathering that brought together celebrities, fashion and entertainment to celebrate gaming's widespread appeal. Other notable events included the Southern Glazer’s product launch party, a team outing for the Charlotte Hornet and an Esports with the Air Force event. On Labor Day, we hosted a Netflix (NASDAQ:NFLX) Live special event featuring an unforgettable hot dog eating contest between world famous competitors Joey Chestnut and Takeru Kobayashi, co-hosted by actor Rob Riggle and WWE hall of Famer Nikki Garcia. Our Omen Mobile arena experienced its busiest quarter since 2023, kicking off with two of the 15 scheduled stops in the Rally Cry Championship Tour, a hybrid tournament based on the highly anticipated return of EA College Football 2025. Additionally, our mobile arena helped Logitech (NASDAQ:LOGI) launch its Pro Leon Peripherals in San Jose, California and conducted a very popular CS2 Super Girl tournament in Oceanside, California featuring some of the world's most competitive all female CS Go teams. It is exciting to see global brands and major productions like Netflix make full use of our unique space. Fully equipped with streaming and production capabilities for diverse events beyond e-sports, we are very optimistic about expanding our target market and audience even further. Now let's dive into the exciting progress we've made with the World Mahjong Tour, WMT as we further developed its schedule and format. The first season will kick-off with two satellite events, one in Los Angeles and the other in Beijing where we expect significant interest building up to the Finale. Winners of this event will earn a coveted spot in the WMT Las Vegas Finale to be held at the HyperX arena in early February, featuring 100,000 prize pool, the largest ever for Mahjong in North America. This grand finale will coincide with the Lunar New Year Festival in Las Vegas and in partnership with the Las Vegas Convention and Visitors Authority will highlight WMT as one of the festival's star attractions. Allied Experiential Entertainment AEE is thrilled to announce that we will be co-hosting our proprietary RhythmX Music Festival in Macau in partnership with the renowned Strawberry Music Festival, a 15-year music festival brand in October 2025. This three day event will feature global music artists and our goal is to develop this festival into a landmark event that will be recognized as the Summer Sonic of Macau attracting audiences and artists from around the world. We anticipate making this festival an annual event moving forward. Let's move on to Allied Mobile Entertainment, AME. Our strategic investment in Z-Tech, a leading developer and operator of casual mobile games, continues to gain traction. The progress has been slightly slower than anticipated. During this quarter, we launched two new casual mobile games to expand our gaming portfolio. For the remainder of the year, our focus will be on maintaining and refining our existing mobile games with a primary emphasis on card and Mahjong games, which are showing strong user retention. We also have an exciting development post quarter end that we'd like to speak to as well. In October, we were thrilled to announce a substantial investment by Yellow River Global Capital, a leading alternative private equity firm specializing in development focused investment in digital technologies, telecommunications, new energy and entertainment. Yellow River is highly synergistic with AGAE and the agreement demonstrates their belief in our strategic priorities moving forward. In addition to the financial investment, Yellow River will provide us with strategic resources, networking opportunities and industry expertise that will be extremely valuable as the company advances its strategic initiatives forward. As part of the investment, Yellow River received warrants that will highly incentivize them to partner with us on different initiatives that will help accelerate our growth. I will now turn the call over to our CFO, Roy Anderson to provide updates on our Q3 financials.
Roy Anderson: Thank you, Yinghua. Good afternoon everyone and thank you for joining us today. Total (EPA:TTEF) revenues for the third quarter of 2024 were $2.2 million, up 93% from the third quarter of 2023. The increase in year-over-year revenue was primarily due to higher casual mobile gaming revenues with Z-Tech integrated into the business as well as an increase in in person revenues following strong demand at both the HyperX and Open Mobile arenas. Total cost and expenses for the third quarter were $3.3 million, an increase from $1.8 million in the prior year period. The increase in costs and expenses were also primarily driven by our investment in Z-Tech in the fourth quarter of 2023, along with an employee retention credit that was received and recorded as a reduction of payroll tax expense in the prior year period. These increases were partially offset by a D&O insurance reimbursement and professional fees related to prior year M&A activities. Our net loss was $4.0 million for the third quarter of 2024 compared to net income of $0.1 million in the third quarter of 2023. The result was impacted by a $3 million loss on our settlement of a 2020 escrow agreement with BPR Cumulus LLC, as well as a $1.2 million net unrealized loss on loans payable and receivable in a foreign currency. These charges were partially offset by a $0.3 million increase in interest income. Almost all of the net unrealized foreign currency transaction loss was recovered or reversed in October 2024. Our adjusted EBITDA loss was $0.1 million and improved from a loss of $0.3 million in the third quarter of 2023. Our adjusted EBITDA includes adjustments for the depreciation and amortization of fixed and intangible assets, stock based compensation, non-recurring legal fees, unrealized foreign currency transaction losses and interest income. Now moving on to our balance sheet. At September 30, 2024, our cash and short term investments position totaled $80.2 million compared to $78.6 million at December 31, 2023. The company's working capital surplus, defined as current assets minus current liabilities, was 62.8 million at September 30, 2024 compared to 66.4 million at December 31, 2023. Our cash and working capital positions were impacted by the aforementioned settlement agreement with BPR, under which $5 million of escrow funds under a 2020 share purchase agreement were redistributed, with BPR receiving $3 million of these funds and AGAE receiving the remaining $2 million. I will now turn the call back over to Yinghua.
Yinghua Chen: Thank you, Roy. We continue to lay the foundation for our business to capitalize on the significant assets available to us as we gear up for the premier season of the World Mahjong Tour starting next month, launch more new mobile game titles and generate growing Demand at our HyperX arena and Omen Mobile Arena. We're poised to see substantial progress impacting both the top and bottom lines of our company. Thank you for your time today. We look forward to speaking with you again when we release our fourth quarter and full year 2024 results in March.
Operator: That concludes today's conference. Thank you for joining us. You may now disconnect your lines.
End of Q&A:
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