Esports Entertainment Group (EEG) reported a 71.9% decline in revenue to $2.7m (£2.2m/€2.5m) in the first quarter following the sale of its Bethard business earlier in the year ), but remains positive about its long-term growth plans.
The group agreed in February to sell the Bethard online casino and sports betting business for €9.5 million. The sale was completed later that month, with EEG divesting the business entirely.
Esports Entertainment also pointed to the winding up and eventual liquidation of the Argyll companies. In December, revenue-generating operations were discontinued, which had an impact on the previous year’s comparison.
However, despite this decline, CEO Alex Igelman remains optimistic about EEG’s long-term prospects. He pointed to the company’s recent restructuring and how it will support growth and help reduce costs.
Shortly after the end of the first quarter, EEG also agreed to acquire a 30 percent minority stake in esports content producer Drafted.gg. Igelman said this will further support his long-term ambitions.
“Over the past few months, we have conducted a thorough review of our business, focusing on expected trends in esports and igaming,” said Igelman. “This review included a detailed analysis of every aspect of our business and identified unprofitable operations and contracts.
“We have taken decisive action and created the conditions for a bright future. While this restructuring resulted in one-time costs, the long-term benefits will far outweigh these costs as we continue to expect an annual reduction in operating expenses of more than $4.0 million.
“This is a time of change for the company. It marks a new beginning and paves the way to maximizing our potential for success, which we believe will result in significant revenue growth and an increase in long-term shareholder value.”
Decrease in sales in the igaming and gaming segments in the first quarter
Looking at the first quarter, sales declined in both core segments at EEG in the three months to September 30th. Igaming revenue, consisting of online betting and casino, fell by 76.7% to €2.0 million, and gaming revenue from e-sports and other activities fell by 27.3% to €733,768.
EEG said its Lucky Dino business was impacted by deteriorating investment and market conditions as well as regulatory changes in Finland and the UK from fiscal 2023. According to the EEG, this is continuing to decline.
In terms of geographic performance, U.S. operations generated $733,768 of all revenue, with interaction activities generating $2.0 million.
However, the sale of certain assets caused cost of sales to fall 81.3% to $602,026 in the first quarter. Costs also decreased in sales and marketing and general and administration, with total operating costs decreasing 51.0% to $7.7 million.
Despite significant cost savings, the net loss increases
After taking into account other income of $214,989, the loss before taxes was $4.8 million. Despite the cost savings, that loss still amounted to more than $4.2 million in 2022.
EEG paid no taxes, meaning its net loss for the quarter was also $4.8 million, compared to $4.2 million a year ago.
However, its adjusted EBITDA loss improved from $1.0 million in the first quarter of 2022 to a loss of $354,870 this year.
The CEO predicts a bright future for EEG
At the end of the first quarter, CEO Igelman returned to EEG’s long-term vision. He said a renewed focus on developing initiatives to expand esports and igaming solutions will help create a more comprehensive, end-to-end offering of online betting options for customers.
“Through our various partnerships, we have built a robust ecosystem that benefits our clients and customers alike,” said Igelman. “An important priority for us is maintaining the highest standards of gaming integrity and auditing processes. We remain committed to ensuring that our content meets the strict legal requirements for skill-based betting.
“Our intent is to commission a thorough third-party integrity review of Drafted.gg to meet state-by-state standards and support our expected rapid expansion into the large U.S. market.
“We are excited about EEG’s future prospects, driven by the potential of our strategic investments, and are confident that the future is bright.”