Allied Gaming & Entertainment Inc. (AGAE) reported its second quarter 2024 financial results, showing an 11% increase in revenue from the first quarter, though a 19% decline from the same period the previous year. The quarterly earnings call, led by CEO Yinghua Chen and CFO Roy Anderson, highlighted the company's strategic initiatives and the launch of the World Mahjong Tour (WMT), modeled after the successful World Poker Tour. Despite the positive outlook on new ventures, the company experienced a net loss and an increase in expenses, largely attributed to litigation costs from a hostile takeover attempt by Knighted Pastures.
Key Takeaways
- Q2 2024 revenue increased by 11% from Q1 but decreased by 19% year-over-year.
- The company launched the World Mahjong Tour, with events culminating in the spring of 2025.
- HyperX Arena remains a popular venue, hosting 65 events in Q2, including 40 third-party events.
- Z-Tech's new mobile game, Balloon Pop Mania, has received positive feedback.
- Litigation from Knighted Pastures contributed to a significant increase in expenses and a net loss for the quarter.
- Cash and short-term investments totaled $95.2 million due to loans from Morgan Stanley (NYSE:MS) Bank Asia Limited.
Company Outlook
- Allied Gaming & Entertainment is optimistic about the World Mahjong Tour and its potential to tap into a resurgent game's market.
- The company anticipates strong momentum leading up to the inaugural finale of WMT in spring 2025.
- AGAE's subsidiaries are expected to capitalize on revenue in the near future.
Bearish Highlights
- Year-over-year revenue saw a significant decline due to a decrease in branded content production.
- The company faced a net loss of $3.9 million and an adjusted EBITDA loss of $1.4 million.
- Litigation expenses from Knighted Pastures' hostile takeover attempt negatively impacted the financials.
Bullish Highlights
- Z-Tech's in-game ad revenue rose 53% over Q1, signaling strong growth potential.
- The HyperX Arena's versatility and high demand underscore the company's solid position in event hosting.
- Allied Gaming & Entertainment is expanding its opportunities in Asia, including negotiations for a partnership with a popular music festival in Macau.
Misses
- The company missed last year's revenue figures, with a significant year-over-year decline.
- The expenses for the quarter exceeded revenues, contributing to the net loss.
Q&A highlights
The Q&A section of the call was not provided in the summary, therefore no highlights from this section can be reported.
In conclusion, Allied Gaming & Entertainment's second quarter of 2024 showed a mix of progress and challenges, with new strategic initiatives and increased expenses due to litigation. The company remains focused on its growth prospects, particularly with the introduction of the World Mahjong Tour. The financial community will be watching closely as AGAE works to turn its strategic initiatives into profitable ventures.
Full transcript - Allied Esports Entertainment Inc (NASDAQ:AGAE) Q2 2024:
Operator: Good day everyone and welcome to the Allied Gaming & Entertainment Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's call will be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Tyler Drew with Addo Investor Relations. Please go ahead.
Tyler Drew: Thank you, operator. Good afternoon and welcome to the Allied Gaming & Entertainment second 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, is available on the company's website, presents definitions of such non-GAAP financial measures, reconciliation 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's 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. We are thrilled to speak with you today about the upward trajectory of our business as we continue to gain traction advancing our strategic initiatives. Notably, Z-Tech is performing well. Our HyperX Arena remains in high demand, and just this morning we announced the creation of the World Mahjong Tour, WMT. Modeled After the highly successful World Poker Tour, WMT will debut later this year, and I will provide more details on that shortly. Our world-class HyperX Arena continues to be a hub of activities, hosting a wide variety of events this quarter, totaling 65 event dates, 40 of which were third-party events. We collaborated with the World Poker Tour on several of these events, which will be invaluable as we develop the World Mahjong Tour. Among the highlights was the WPT Seminole Hard Rock Poker Showdown final table, held at the arena on May 29th, where Josh Reichard claimed victory at nearly $1 million in prize money. The following day on May 30th, we hosted the WPT Choctaw Championship final table where James Mackey secured the title and a seat at the upcoming WPT World Poker Championship. Other notable events this quarter included the Sonic Boom Unofficial LVL Up Afterparty, the Mobile Legends Bang Bang 2024 North America Challenger Tournament Spring Grand Finale, and the Licensing International Excellence Award. The HyperX Arena truly embodies versatility, hosting events that range from world-class poker tournaments to prestigious industry awards ceremonies besides our esports and gaming events. Now, let me turn to this morning's exciting announcement, the launch of the World Mahjong Tour, a groundbreaking series of events that will bring the timeless game of mahjong to a global stage. Why is it so compelling for us? For starters, mahjong is a game of skill, strategy, and a touch of luck with a history spanning over a century. Its popularity has been resurging in recent years, especially among the younger generation of the population. While it has always been a beloved game, it has never been monetized or brought to the market on a global scale until now. Additionally, the WPT model has proven to be sustainable and we have the experience required having owned, operated, and recently partnered with the World Poker Tour. For the inaugural season, we will host a series of regional tournaments and events culminating in the final at HyperX Arena in the spring of 2025. WMT will leverage expertise from all three of AGAE's subsidiaries as we will introduce our proprietary mobile games, module-themed content production, and a comprehensive membership service model. This multifaceted approach will drive brand awareness and will provide fans and players with a unique and immersive experience, both online and offline. We've been working diligently behind the scenes on this endeavor for the past year, and we are very optimistic that WMT will be a game changer for us. While we will utilize resources from across the company, Allied Experiential Entertainment, or AEE, will be very involved in all aspects of WMT. And we are also excited with AEE's progress in other areas of business as it continues to expand on its opportunities in Asia. Notably, we are in close negotiations to partner with a popular annual music festival in Macau, and we look forward to sharing more details in the future as negotiations are finalized. Moving on to Allied Mobile Entertainment, or AME, our strategic investment in Z-Tech, a prominent developer and operator of casual mobile games, is progressing well. Z-Tech had a busy quarter, having released a brand new casual mobile game, Balloon Pop Mania, a popular Match 3 category in May, its second release of the year. The new casual mobile game is very fun and interactive. So far, it has been popular with gamers and the feedback from those who have downloaded it has been very positive. We're also utilizing Z-Tech for its game distribution capabilities and are currently assessing which games within our AME catalog are best suited for marketing and distribution on the platform. Z-Tech’s momentum is evident. With Q2 in-game ad revenue rising 53% over Q1, the business is well positioned for a robust second half of the 2024 and sustained revenue growth. I will now turn the call over to our CFO, Roy Anderson, to provide updates on our Q2 financials.
Roy Anderson: Thank you, Yinghua. Good afternoon, everyone, and thank you for joining us today. Total revenues for the second quarter of 2024 were $2.6 million, up 11% from the first quarter, but down 19% from the second quarter of 2023. The decline in year-over-year revenue was primarily due to a $2 million decrease in revenues from our branded content production arm offset by a $1.7 million increase in casual mobile gaming revenues now that Z-Tech has been integrated into the business and is performing well. Total cost and expenses for the second quarter were $7.9 million, an increase from $4.7 million in the prior year period. Unfortunately, approximately $3 million of the increase in expenses was driven by costs related to the counterproductive actions of Knighted Pastures, including litigation filed by them against AGAE in their hostile attempt to take over the company at a meaningfully discounted price. Our net loss was $3.9 million for the second quarter of 2024 compared to a loss of $1.8 million in the prior quarter and a loss of $0.7 million in the second quarter of 2023. Our adjusted EBITDA loss was $1.4 million compared to a loss of $1.7 million in the prior quarter and a loss of $1.1 million in the second 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, and interest income. Now moving on to our balance sheet. At June 30, 2024, our cash and short-term investments position totaled $95.2 million, including $5 million of restricted cash compared to $78.6 million at December 31, 2023. The increase in our cash and short-term investments is primarily attributable to the proceeds of low and non-interest bearing loans from Morgan Stanley Bank Asia Limited. The company's working capital surplus defined as current assets minus current liabilities, was $61.8 million at June 30, 2024, compared to $66.4 million at December 31, 2023. I will now turn the call back over to you, Yinghua.
Yinghua Chen: Thank you, Roy. Before closing the call out, I'd like to reiterate my excitement for all the positive momentum we are experiencing at Allied Gaming & Entertainment and say with full confidence that I believe our management team and Board have the right skills and expertise to lead the company forward. Our three subsidiaries all have revenue capitalized in the near future. We're especially optimistic about the opportunities presented by the World Mahjong Tour and our ability to gain strong momentum leading up to the inaugural finale in the spring of 2025. The highly popular and resurgent game of Mahjong offers vast untapped market potential that we're eager to capitalize on. Thank you for your time today. We look forward to speaking with you again when we release our third quarter 2024 results in November.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful evening.
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